[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES


                             FIRST SESSION


                           SEPTEMBER 12, 2017


                           Serial No. 115-91


        Printed for the use of the Committee on Foreign Affairs

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ 

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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM R. KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID N. CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina          AMI BERA, California
MO BROOKS, Alabama                   LOIS FRANKEL, Florida
PAUL COOK, California                TULSI GABBARD, Hawaii
SCOTT PERRY, Pennsylvania            JOAQUIN CASTRO, Texas
RON DeSANTIS, Florida                ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina         BRENDAN F. BOYLE, Pennsylvania
TED S. YOHO, Florida                 DINA TITUS, Nevada
ADAM KINZINGER, Illinois             NORMA J. TORRES, California
LEE M. ZELDIN, New York              BRADLEY SCOTT SCHNEIDER, Illinois
    Wisconsin                        TED LIEU, California
ANN WAGNER, Missouri
BRIAN J. MAST, Florida
THOMAS A. GARRETT, Jr., Virginia

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                            C O N T E N T S



Ms. Susan A. Thornton, Acting Assistant Secretary, Bureau of East 
  Asian and Pacific Affairs, U.S. Department of State............     5
The Honorable Marshall Billingslea, Assistant Secretary, Office 
  of Terrorism and Financial Intelligence, U.S. Department of the 
  Treasury.......................................................    12


Ms. Susan A. Thornton: Prepared statement........................     8
The Honorable Marshall Billingslea: Prepared statement...........    15


Hearing notice...................................................    56
Hearing minutes..................................................    57
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    59
Questions submitted for the record by the Honorable Eliot L. 
  Engel, a Representative in Congress from the State of New York, 
  and responses from:
  Ms. Susan A. Thornton..........................................    61
  The Honorable Marshall Billingslea.............................    67
Questions submitted for the record by the Honorable Ami Bera, a 
  Representative in Congress from the State of California, and 
  responses from:
  Ms. Susan A. Thornton..........................................    72
  The Honorable Marshall Billingslea.............................    75
Questions submitted for the record by the Honorable Ann Wagner, a 
  Representative in Congress from the State of Missouri, and 
  responses from:
  Ms. Susan A. Thornton..........................................    78
  The Honorable Marshall Billingslea.............................    80
Questions submitted for the record by the Honorable Bradley S. 
  Schneider, a Representative in Congress from the State of 
  Illinois, and responses from:
  Ms. Susan A. Thornton..........................................    81
  The Honorable Marshall Billingslea.............................    82



                      TUESDAY, SEPTEMBER 12, 2017

                       House of Representatives,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2172, Rayburn House Office Building, Hon. Ed Royce 
(chairman of the committee) presiding.
    Chairman Royce. Before we gavel the hearing in, I would 
just like to remind audience members that disruption of 
committee proceedings is against the law and will not be 
tolerated. Although, wearing themed shirts while seated in the 
hearing room is certainly permissible, holding up signs during 
the proceedings, that is not permissible. So any disruptions 
will result in a suspension of the proceedings until the 
Capitol Police can restore order.
    With that, I would like to call us to order here for our 
hearing this morning, and ask all the members to take their 
seats, if you could. On September 3rd, North Korea detonated a 
nuclear device that, according to news reports, was stronger 
than all of its previous tests combined. This hydrogen bomb 
represents the latest advancement in North Korea's long-running 
nuclear and intercontinental ballistic missile program, which 
now pose an urgent threat to the United States. Moreover, the 
apparent speed in which these North Korean advancements have 
occurred are challenging the security structure across East 
Asia, creating dangerous instability in the region, and that 
instability we will likely be dealing with for decades to come.
    So today, this committee is going to discuss the tools that 
must be deployed and fully utilized to address these threats. 
And I believe the response from the United States and our 
allies should be supercharged. We need to use every ounce of 
leverage. When I had breakfast this morning with Secretary 
Tillerson, we laid out these issues. That leverage includes 
sanctions, it includes diplomacy, it includes projecting 
information into North Korea to put maximum pressure on this 
rogue regime. Time is running out.
    And let us be clear, sanctions can still have an important 
impact. North Korea's advanced weapons programs rely on 
foreign-sourced technology. Much of these programs are made 
outside the country. North Korea pays an inordinate amount of 
money, and it has to have hard currency to do it, to run this 
very expensive ICBM program and this nuclear weapons program. 
Since it requires hard currency, that is the Achilles heel. 
Unfortunately, years have been wasted as sanctions have been 
weak, allowing North Korea to access financial resources and 
build its nuclear and missile programs. Any sanction that 
crimps North Korea's access to technology is urgently needed.
    Congress has done its part to ramp up economic pressure. We 
passed a North Korea Sanctions bill last February, authored by 
myself and Mr. Eliot Engel, our ranking member. In July, we 
increased the tools at the administration's disposal, as part 
of the big sanctions package that we passed here, including 
sanctions on North Korea and Russia and the Iran missile 
program. Part of that included targeting North Korean slave 
labor exports. Part of it, again, refined some of the focus on 
banking. And part of it, also, was focused on exports to ports 
around the world from North Korea.
    In August, the administration secured a major victory with 
the unanimous adoption of U.N. Security Council Resolution 
2371, which Ambassador Haley called ``the strongest sanctions 
ever imposed in response to a ballistic missile test.'' She is 
now hard at work on another resolution.
    To be effective, these tools need to be implemented 
aggressively. The administration deserves credit for increasing 
the pace of designations. And I appreciate Treasury Secretary 
Mnuchin's statements that more are coming. But we need to 
dramatically ramp up the number of North Korea-related 
    These designations do not require Beijing's cooperation. We 
can designate Chinese banks and companies unilaterally, giving 
them a choice between doing business with North Korea or the 
United States. And I would just observe that not doing business 
with the United States for many of these companies would risk 
bankruptcy for these institutions.
    Earlier this year, Treasury sanctioned the Bank of Dandong, 
a regional Chinese bank. And that is a good start. But we must 
target major Chinese banks doing business with North Korea, 
such as China Merchants Bank, and even big state-owned banks, 
like the Agricultural Bank of China. They have a significant 
presence in the United States. And if they do not stop doing 
business with North Korea, they should be sanctioned now.
    It is not just China, we should go after banks and 
companies in any countries that do business with North Korea 
the same way. Just as we pressed China to enforce U.N. 
sanctions banning imports of North Korea coal and iron and 
seafood, we should press countries to end all trade with North 
Korea. This grave nuclear risk demands it.
    Sanctions are not the only way to apply pressure on the 
regime. We must maintain a united front with our allies. I just 
returned from South Korea where people are on edge. We were 
there when the missile was launched over Japan. It doesn't 
matter if you are talking to government officials there, or the 
business community, or the average person on the street; they 
all understand the threat. So I am pleased that the THAAD 
missile defense system has been fully deployed. I am also 
pleased that the administration is strengthening regional 
deterrence through additional U.S. armed sales to Japan and 
South Korea, which we discussed this morning.
    Finally, we need to do much better at getting information 
into North Korea so that North Koreans can better understand 
the brutality and corruption of the self-serving Kim regime. 
And these efforts are already pressuring the regime, creating 
some unrest and increasing defections from North Korea. But I 
am afraid our efforts here grade poorly. International 
broadcasting and fomenting dissent just have not been a 
priority, and that is unacceptable in this situation. While we 
should take a diplomatic approach to North Korea, the reality 
is that this regime will never be at peace with its people, its 
neighbors, or us, and now is the time to apply that pressure.
    With that said, let me turn to the ranking member of our 
committee, Mr. Eliot Engel of New York.
    Mr. Engel. Mr. Chairman, thank you for calling this 
hearing. You and I have worked together for a long time on the 
Korean situation. We had a hearing on this topic to start the 
year. This committee works in a bipartisan manner to advance 
some of the toughest sanctions ever on North Korea, which are 
now U.S. law.
    Yesterday the United Nations Security Council unanimously 
agreed to Resolution 2375, in response to the Kim regime's 
sixth nuclear test. And we are revisiting the threat of North 
Korea today so we can hear directly from the administration.
    Mr. Chairman, I am grateful for your unwavering leadership 
on this issue. To our witnesses, welcome to the for Foreign 
Affairs Committee and thank you for your service.
    Acting Assistant Secretary Thornton, I have tremendous 
confidence in you and our career diplomats, but it is hard to 
believe that nearly 8 months into this administration, there is 
no nominee for Assistant Secretary for East Asian and Pacific 
Affairs. The same goes for Ambassador to South Korea, Under 
Secretary for Arms Control and International Security, and a 
range of other senior State Department officials. This 
administration has said that North Korea is its top foreign 
policy priority; but between the President's dangerous and 
irresponsible communication on the matter, and the inexplicable 
reluctance to get personnel in place, he is, in my opinion, 
undercutting his own peaceful pressure strategy.
    I view the Kim regime's nuclear program as the single 
greatest threat to American national security and to global 
security. Right now, we need all hands on deck and focused on 
the same objective. We do that here in this committee. But that 
objective, of course, also gets to one of the main questions. 
While we all share the desire to rid North Korea of nuclear 
weapons, some have said that Kim will never give them up 
regardless of the pressure.
    I have been to North Korea twice, Mr. Chairman, as you 
know, and I can tell you and everybody else, that this is not a 
regime that looks at the world the way any other government 
does. The Kim regime is bent on self-preservation above all 
else and is very willing to sacrifice their own people to 
achieve that end. That makes them obviously incredibly 
dangerous. The military options in the North Korea contingency 
are incredibly grim and it is hard to overstate just how 
devastating a conflict on the Korean peninsula would be. If 
this conflict escalates into a war, we could be measuring the 
cost in millions of lives lost.
    Time is clearly running out. Once the regime in Pyongyang 
possesses nuclear weapons that can strike the United States, it 
will immediately raise questions about the reliability of our 
security commitments to our alliance partners, Japan and South 
Korea. Nuclear capabilities of this kind would likely embolden 
the North Koreans to engage in other bad behavior, such as 
harassment of our allies and continued proliferation of nuclear 
technologies. Some even speculate that the Kim regime might 
even seek reunification of the peninsula on its own terms.
    So we need a smart strategy, first of all, and then 
definitely consistent execution of that strategy, and 
obviously, that is no easy task. Administrations of both 
parties were unable to put a stop to North Korea's nuclear 
program. North Korea detonated its first nuclear weapon in 
2006, and a few years later the Bush administration removed 
North Korea from the State sponsor of terrorism list as an 
inducement to join the Six-Party talks.
    Since Kim Jong Un assumed power, bomb and missile tests 
have increased in frequency. And this year, since the start of 
the Trump administration, we have seen an alarming increase in 
the frequency and the significance of tests, and of course, the 
detonation a few weeks ago of what appears to be a 
thermonuclear device.
    So where do we go from here? Personally, I agree with 
Secretary of Defense Mattis that we are ``never out of 
diplomatic solutions when it comes from North Korea,'' 
although, I am not sure President Trump shares that view. 
Frankly, I am not sure he even knows what his views are on 
this. At present, however, Kim Jong Un doesn't seem to be 
anywhere close to sitting down for talks of any kind, much less 
sincere negotiations.
    The first order of business should be to have a moratorium 
on testing, to halt the progress of North Korea's nuclear 
program. Our objective has long been a denuclearized North 
Korea, and we cannot lose sight of that aim. In my view, we 
have not exhausted economic pressure through sanctions, and we 
need to do all we can to keep pressure up on the Kim regime. 
But at the same time we increase pressure, we must also ramp up 
coordination with our allies. We must demonstrate that 
defensive military measures are at the ready, both to reassure 
our allies and to deter the regime from any action that could 
lead to deadly escalation.
    I am interested in hearing from our witnesses today about 
how we are going to pursue those aims. Under ordinary 
circumstances, I would say this is a tall order. But I have to 
say again, the President's behavior surrounding this crisis is 
making the situation even more challenging. Outrageous red 
lines like threats of fire and fury, shaming our allies through 
tweets, inconsistently from one day to the next about Kim Jong 
Un or China or economic partnership with South Korea, picking a 
fight with South Korea right at this time, loose talk about 
expanding America's nuclear arsenal, and the proliferation of 
these devastating weapons. All these actions undermine the 
credibility of the Office of the President, and the credibility 
of the U.S. Government, effectively undermining U.S. 
leadership, and driving a wedge between Washington and our 
friends, creating grave uncertainty with China, whose 
cooperation we need, and with North Korea, whose leader is, as 
we know, single-minded and ruthless.
    Our country faces a serious national security challenge, 
and we need principled and visionary leadership. We need to be 
standing with our allies, acting with integrity, and 
reaffirming our commitments. The President needs to lead on the 
global stage, pushing China and Russia to enforce sanctions 
effectively, and building consent is about a path forward, not 
waiting to see who does what next and then reacting with the 
first words that come to mind.
    So I look forward to hearing from our witnesses about what 
American leadership should look like in this crisis, and how we 
find the right path forward. I thank you again, Mr. Chairman, 
and I yield back.
    Chairman Royce. Thank you. This morning we are pleased to 
be joined by a distinguished panel. We have with us Ms. Susan 
Thornton, Acting Assistant Secretary in the Bureau of East 
Asian Affairs at the Department of State. And as a career 
member of the foreign service, she has spent the last 20 years 
working on U.S. policy in Europe and Asia, focused on the 
countries of the former Soviet Union and on East Asia.
    Assistant Secretary Marshall Billingslea is the Assistant 
Secretary in the Office of Terrorism and Financial Intelligence 
at the Department of the Treasury. Mr. Billingslea previously 
served as managing director of business intelligence services 
for Deloitte, where we focused on illicit finance. So we 
welcome both our witnesses to the committee.
    Without objection, the witnesses' full, prepared statements 
are going to be made part of the record. And all members here 
are going to have 5 calendar days to submit any statements or 
any additional questions of you, or any extraneous material for 
the record. And with that, I would just suggest--and we will 
begin with you, Assistant Secretary Thornton. If you could 
summarize your remarks, and then we will go to Mr. Billingslea, 
and then we will go to questions.


    Ms. Thornton. Thank you very much, Mr. Chairman. Chairman 
Royce, Ranking Member Engel, members of the committee, thank 
you so much for the opportunity to appear before you today to 
discuss the ever-increasing challenge that North Korea poses. 
The threat posed by North Korea's ballistic missile and nuclear 
program is grave.
    North Korea's sixth nuclear test on September 3 is an 
unacceptable provocation that ignores repeated calls from the 
international community for a change in their behavior. It 
followed the August 28 ballistic missile launch that overflew 
portions of Hokkaido, Japan, and two ICBM launches in July. 
These provocations represent a tangible threat to the security 
of Japan and South Korea, our allies, and to the entire globe. 
We cannot allow such flagrant violations of international law 
to continue.
    North Korea has also made dramatic threats regarding its 
ability to hit Guam and other parts of the United States. 
Secretary of Defense Mattis has made clear that we have the 
ability to defend ourselves and our allies from any attack, and 
that our commitments to our allies remain iron clad. This 
administration, though, has developed a clear strategy of 
applying international pressure to hold Pyongyang to account.
    First, we continue to push for strong U.N. sanctions. Last 
night the U.N. Security Council passed another significant set 
of international sanctions, the second set of sanctions in the 
last 2 months, unanimously adopted by the U.N. Security 
    Second, we are using our domestic laws to impose sanctions 
on individuals and entities that enable the DPRK's illicit 
    Third, we are pressing countries to fully implement the 
U.N. Security Council resolutions and sanctions, and to 
harmonize their domestic sanctions regimes with those Security 
Council designations.
    Fourth, we are urging the international community to cease 
normal political interactions with the DPRK, and increase its 
diplomatic isolation.
    And, fifth, we are calling on countries to cut trade ties 
with Pyongyang to choke off revenue sources that finance the 
regime's weapons programs. Even as we pursue denuclearization 
on the Korean peninsula, deterrence, as was mentioned by the 
ranking member, is an essential part of our strategy. We have 
deployed the THAAD anti-missile system to the Republic of 
Korea, and continue to take other measures to prepare ourselves 
to respond to any DPRK attack, whether on the United States, 
South Korea, or Japan, with overwhelming force.
    We have been clear, we are not seeking regime change or 
collapse in North Korea, and we do not seek accelerated 
reunification, or an excuse to send troops north of the 
demilitarized zone. We do seek peaceful denuclearization of the 
Korean peninsula, and a North Korea that stops belligerent 
actions and is not presenting a threat to the United States or 
our allies.
    We recognize that the success of this pressure strategy 
will depend on cooperation from international partners, 
especially China. And we are clear-eyed in viewing China's 
growing, if uneven support, for international measures against 
the DPRK. China has taken some notable steps on implementing 
sanctions, but we would like to see them do more.
    We continue to engage with China and Russia to further 
pressure the DPRK, but if they do not act, we will use the 
tools at our disposal. Just last month, we rolled out new 
sanctions targeting Russian and Chinese individuals and 
entities that were doing illicit trade with North Korea. So 
while there is more work to be done, we do see encouraging 
signs of progress on increasing the pressure on the North 
Korean regime.
    Countries spanning the globe have issued strong statements 
against the ICBM test and the most recent nuclear test. We have 
seen countries expel sanctions, North Korean officials, prevent 
certain individuals from entering their jurisdictions, reduce 
the size of North Korean diplomatic missions in their 
countries, and cancel or downgrade diplomatic engagements or 
    Just in the recent days, we have had two announcements by 
two countries, Mexico and Egypt, about their efforts to 
downgrade relations with North Korea. Countries have halted 
visa issuances to North Korean laborers and are phasing out the 
use of these workers. South Korea, Japan, and Australia have 
implemented unilateral national sanctions against targeted 
entities and individuals, and European partners are 
collaborating with us on maximizing pressure on the DPRK.
    Unfortunately, despite all of this, we have yet to see a 
notable change in the DPRK's dangerous behavior or signs that 
it is interested in credible talks on denuclearization. We will 
continue to step up efforts to sanction individuals and 
entitles, enabling the DPRK regime and its weapons programs. 
Following the nuclear test, we are pressing hard for a new 
Security Council resolution, which, of course, was adopted last 
night. And we hope that these new sectoral sanctions, including 
textiles, provisions on oil, provisions on shipping, et cetera, 
will allow us to increase our pressure.
    China and Russia should continue to exert their unique 
leverage, of course, on the DPRK. And it should be clear that 
we will never accept North Korea as a nuclear state. We will 
continue to work within our alliances to develop additional 
defense measures to protect the people of the United States, 
and also of our allies. And at the same time, we will not lose 
sight of the plight of the three remaining U.S. citizens who 
have been unjustly detained by North Korea, nor of the regime's 
egregious human rights violations.
    We will continue to reiterate our willingness to resolve 
this issue through diplomacy. And if the DPRK indicates an 
interest in serious engagement, we will explore that option, 
but with clear eyes about the DPRK's past track record of 
violating negotiated agreements.
    Thank you, again, for letting me testify today, and I am 
looking forward to your questions.
    [The prepared statement of Ms. Thornton follows:]


    Mr. Billingslea. Chairman Royce, Ranking Member Engel, 
distinguished members of this committee, thank you for the 
opportunity to appear before you today to update you on the 
measures that the Treasury Department is undertaking in concert 
with the Department of State, and the broader administration 
efforts to deal with the unacceptable provocations and threats 
posed by North Korea.
    In order to constrain Kim Jong Un, the international 
community has unanimously enacted multiple United Nations 
Security Council resolutions. In fact, with each provocation by 
North Korea's dictator, the nations of the world have responded 
with steadily tightening constraints of sanctions and 
    Under previous administrations, the United Nations had 
already prohibited trade in matters such as arms, luxury goods, 
minerals, monuments, and the maintenance of offices and 
subsidiaries and bank accounts in North Korea. And while this 
had clearly inhibited North Korea's quest for weapons of mass 
destruction, it was not enough.
    On August 5, our administration worked with the other 
permanent members of the U.N. Security Council to pass 
Resolution 2371, striking at the core of North Korea's revenue 
generation. That resolution, drafted by the United States, 
embargoes all importation of North Korean coal, iron, lead, and 
seafood now requires nations to cap employment of North Korean 
citizens sent abroad as slave labor.
    Very importantly, last night, under Ambassador Haley's 
leadership, the United States passed, with the U.N. Security 
Council, Resolution 2375, which now targets North Korea's few 
remaining sources of revenue; very importantly, the export of 
textiles. It further restricts North Korea's ability to acquire 
revenue from overseas slave labor, and it cuts off about 55 
percent of the refined petroleum products that are going into 
North Korea, and it bans further joint ventures with that 
    These two recent resolutions are central to our efforts to 
mobilize the international community, and to deny funds to Kim 
Jong Un's weapons programs. The fact, however, is that North 
Korea has been living under U.N. sanctions for over a decade. 
It has nevertheless made significant strides toward its goal of 
building a nuclear-tipped ICBM. As is the case with any 
international agreement, the effectiveness of U.N. Security 
Council resolutions depends upon implementation and 
    Kim Jong Un has two key financial vulnerabilities, which we 
are targeting in the Treasury Department: First, he needs 
revenue to maintain and expand his WMD and ballistic missile 
programs; and second, he needs access to the international and 
financial system to acquire the hard currency that Chairman 
Royce mentioned, to transfer funds, and to pay for goods, both 
licit and illicit.
    There are only a number of finite ways that North Korea can 
raise significant amounts of foreign exchange, and for many 
years, coal has been the center of gravity for revenue 
generation. By our estimates, prior to the latest U.N. Security 
Council resolutions, coal shipments brought in more than $1 
billion a year to the regime.
    North Korea was making an additional $500 million or so 
from iron, lead, and seafood, and the textile ban will deny 
them around $800 million that they were generating in previous 
years. This is why these resolutions are so important. Again, 
effective implementation of this and all of the prior U.N. 
Security Council resolutions is essential.
    Consistent with this, on August 22, we struck at the heart 
of North Korea's illegal coal trade with China. Treasury 
designated 16 individuals and entities, including three Chinese 
companies that are among the largest importers of North Korean 
coal. We estimate that collectively, these companies were 
responsible for importing nearly $\1/2\ billion worth of North 
Korean coal between 2013 and 2016. In doing this, we sent two 
clear messages: The first was to North Korea. We intend to deny 
the regime its last remaining sources of revenue unless and 
until it reverses course and denuclearizes.
    The second message was to China, we are capable of tracking 
North Korea's trade in banned goods, such as coal, despite 
elaborate evasion schemes, and we will act even if the Chinese 
Government will not.
    On June 1 of this year, we targeted a different kind of 
North Korean revenue, labor. We designated three individuals 
and six entities involved in that set of actions, and we also 
took actions in March. In total, under this administration, the 
Treasury Department is engaged in a full court press on Kim 
Jong Un's revenue generation networks, and we have singled out 
37 specific entities involving the most lucrative types of 
    Mr. Chairman, I want to share with you today another type 
of evasion scheme in which North Korea is engaged. As part of 
the efforts to acquire revenue, the regime employs deceptive 
shipping practices to conceal the true origin of goods. 
Pyongyang falsified the identity of vessels to make it harder 
for governments to determine if ships docking in their ports 
are linked to North Korea. And despite this evasion, we will 
expose the individuals and companies that are providing 
insurance, maintenance, or other services to North Korean 
    For instance, in June, we designated Dalian Global Unity, a 
Chinese company, that apparently was transferring about 700,000 
tons of freight annually between China and North Korea. I am 
pleased to provide for the committee today, additional 
exposures of these duplicitous actions. The intelligence 
community has provided to your committee today evidence of how 
vessels originate in China, they turn off their transponders as 
they move into North Korean waters, they dock at North Korean 
ports, and they on-load commodities such as coal. They keep 
those transponders off, and then they turn them back on as they 
round to the South Korean peninsula, and they head into a 
Russian port.
    In this particular case, this vessel, MV Bai Mei 8 
registered from St. Kitts and Nevis, sat in that Russian port 
for a period of time, and then headed back out to water, 
ultimately docking back in China with North Korean origin coal. 
Sanctions evasion.
    Of the second slide, which we will show now, is yet another 
example. In this particular example, you have a vessel that 
pulled into North Korea, kept its transponder off, in violation 
of international maritime law, docked in Russia, offloaded the 
North Korean coal. Another vessel, that one was Panamanian, 
another vessel from Jamaica, the Jamaican flag, pulled in, 
picked up the North Korean coal, and headed straight to China, 
again, to circumvent U.N. sanctions.
    Mr. Chairman, the other prong of our effort is to close in 
on the way North Korea seeks to access the international 
financial system. Because of the sanctions regimes we have in 
place, it is difficult for North Korean individuals and 
entitles to do business in their true names, and so that is why 
they maintain representatives abroad who are engaged in all 
manner of obfuscation of creation of shell and front 
companies--in fact, I dealt with many of these entities when I 
served in the private sector--to help conceal North Korea's 
overseas footprint.
    These individuals are crucial to the North Korean regime 
because they have the expertise needed to establish front 
companies, open bank accounts, and conduct transactions to move 
and launder funds. It is incumbent upon the financial services 
industry, both here and abroad, to stay vigilant, and I urge 
those who might be implicated in the establishment of shell or 
front companies for the DPRK, or anyone who is aware of such 
entitles, to come forward with that information now, before 
they find themselves swept up in our net.
    We are closing in on North Korea's trade representatives. 
This year we have already designated several bank and trading 
operatives in China, Cuba, Russia, and Vietnam. And we are 
closely coordinating with the Department of Justice and others 
to target these various North Korean networks that are 
transferring funds.
    The chairman mentioned our actions with the Bank of 
Dandong. We have designated that bank under Section 311 of the 
U.S.A. Patriot Act, and found it to be of a primary money 
laundering concern, and issued a notice for proposed rule 
    Again, I recognize that I am over time with the committee, 
therefore, I will wrap up my comments. But suffice to say, that 
our actions--this was the first Treasury Department action in 
over a decade that targeted a non-North Korean bank for 
facilitating North Korean financial activity. It demonstrates 
our commitment to take action. We look forward to taking action 
with the Chinese where possible. And in the event that that is 
not possible, we will, nevertheless, move forward to safeguard 
the U.S. and international financial system. Thank you, 
    [The prepared statement of Mr. Billingslea follows:]

    Chairman Royce. Assistant Secretary Billingslea, thank you 
very much. Let me make a point in terms of when we have seen 
sanctions that were effective. In 2005, we had the sanctions on 
Banco Delta Asia. At that point in time, in talking to a senior 
defector that worked in their missile program, he indicated 
that because we had cut off the hard currency, they had to shut 
down their ICBM program.
    One of the things he indicated also, or was indicated by 
the conversations we had with senior defectors, was that during 
that period of time, the ability of the regime, or the dictator 
as they called him, to get his hands on hard currency, was 
blocked. And the inability of a dictator to be able to pay his 
generals--and this was the quote--``is a very bad position for 
a dictator to be in.''
    In retrospect, we, therefore, say two things happen during 
that period of time in terms of the desperation of the 
situation within the Kim regime. This was under his father, Kim 
Jong Il. We have the ability to replicate that if we have the 
will to do what was done in 2005. And in 2005, it was maybe a 
dozen banks that were being used. At that time, Treasury found 
that North Korea was counterfeiting $100 U.S. bills, and that 
gave Treasury the authority to do this until such time as the 
Department of State forced them to lift the asset freezes.
    But during that time, we had an enormous amount of pressure 
being brought to bear. In this particular case--and let me use 
your words here--but it is China that is primarily involved in 
the support system in terms of, I would estimate, 90 percent of 
the hard currency that the regime needs. Now, we have managed 
to cut off a lot of that because it is very expensive to run an 
ICBM program, or a nuclear weapons program, billions and 
billions and billions of dollars. North Korea's money has no 
value, so they have to get this foreign currency into the 
country in order to pay for it on a month to month basis, in 
terms of what they are trying to build out.
    You said if China wishes to avoid future measures such as 
those imposed on Bank of Dandong, or the various companies 
sanctioned for illegal trade practices, then it urgently needs 
to take demonstrable public steps to eliminate North Korea's 
trade and financial access. That is the point to us here in 
Congress. Some of our opinion on this, in terms of Congress, is 
affected by the fact that China's biggest banks, even state-
owned banks, still do business with North Korea. That has got 
to end completely. We cannot accept half measures on this. 
These transactions are what supports the regime's nuclear 
    And I understand the administration is pressing Beijing to 
take action here. I understand that many of these banks have 
significant operations in the United States, and that there 
would be consequences to our economy. However, U.S. presence is 
the very thing that makes our sanctions so powerful. They would 
rather do business with us than North Korea in terms of how 
consequential that is to these institutions.
    So at what point do we designate these major Chinese banks 
for doing business with North Korea? We have done our outreach 
to Beijing, with limited results. Shouldn't we demonstrate the 
seriousness with which we take the North Korean nuclear threat, 
while further isolating that regime in North Korea, Kim Jong 
Un, from the financial system that he uses to build out his 
atomic weapons program?
    Mr. Billingslea. Chairman, first, let me say that China and 
Russia are to be recognized for supporting the adoption of the 
two most recent U.N. Security Council resolutions, which are 
significant for the clamp-down that they enable us to place on 
Kim Jong Un's revenue. However, we have been very clear that if 
China wishes to avoid further measures, such as that which 
happened to the Bank of Dandong, we urgently need to see 
demonstrable action.
    I cannot tell the committee today that we have seen 
sufficient evidence of China's willingness to truly shut down 
North Korean revenue flows, to expunge North Korean illicit 
actors from its banking system, or to expel the various North 
Korean middlemen and brokers who are continuing to establish 
webs of front companies. We need to see that happen.
    Chairman Royce. To both our Assistant Secretaries, let me 
say this: Last night we saw the Security Council unanimously 
approve its third U.N. sanctions resolution this year on North 
Korea. And this latest measure restricts the regime's oil 
imports while banning textile exports in joint ventures. 
However, the nature of the Security Council means that this was 
a compromise to ensure the regime cannot claim this compromise 
that came out of this was a victory, which is what they will 
try to do. We have got to demonstrate the impact of these new 
international sanctions by making certain that this time, no 
one is skirting those sanctions.
    So what steps will the Departments of State and Treasury 
take in the coming days to implement the new Security Council 
resolution? And how will these actions that you are about to 
take, send this clear message to Kim Jong Un on the reality 
that this time, we are going to follow through with enforcement 
and give them no space in terms of additional hard currency?
    Ms. Thornton. Thank you, Mr. Chairman. It is very clear in 
the process of ramping up this peaceful pressure campaign on 
the North Korean regime, that one of the key elements is to 
keep to global coalition that we have got behind these 
sanctions together, and to keep every single country in the 
coalition working actively to continue to squeeze on trade, on 
labors, on financial transactions, on shipping, et cetera. And 
what we have been doing in the Department of State is working 
across the board with every one of our diplomatic partners 
around the world. The Secretary raises the North Korea issue in 
every single one of his meetings with foreign leaders. And we 
have seen a great response from countries around the world who 
are increasingly outraged over North Korea's provocative 
    So we have really been working hard to close the net. We 
have seen diplomatic establishments closed, ambassadors kicked 
out, other North Korean representatives kicked out. The 
Philippines announced recently they are going to cut complete 
trade with North Korea. So we are having an effect on a lot of 
the networks that the North Koreans have built around the 
    I think the sanctions, 2371, last month, and now, 2375, 
last night, we are going to be working aggressively to make 
sure that we and all of our partners around the world, too, are 
working with every country that we can to make sure that every 
country has the capacity to track illicit transactions, to go 
after violators, and raising consciousness, but, also, giving 
them the tools to go after those bad actors, is what we are 
focused on.
    We are trying to clean up ship registries and give 
countries the ability to better track the shipping of ships 
that are flagged under their flag, et cetera. So I think we are 
still working on implementing these most recent two U.N. 
Security Council resolutions. We also have an ongoing, very 
close dialogue with the Chinese on what they are doing to track 
sanctions, and we share a lot of information with them, but we 
will also drive them to shut down networks that we find.
    Chairman Royce. Thank you, Assistant Secretary Thornton, my 
time has expired. I am going to go to Mr. Engel for his 
    Mr. Engel. Thank you, Mr. Chairman. You know, when I was in 
North Korea, and this is a while back, but twice, one of the 
things that struck me, we had just deposed Saddam Hussein, and 
one of the top North Korean officials--it wasn't the leader, 
but it was a very high ranking official--said to us, Saddam 
Hussein didn't have nuclear weapons, and look where he is now. 
From those two trips I took, that is the one thing that rang in 
my ears. And now, of course, they are carrying out those 
horrific words.
    Secretary Thornton, let me ask you, in Europe we have NATO. 
Obviously, in Asia, we don't have a treaty group like NATO. So 
how do we reassure, in your view, our allies who doubt our 
resolve to defend Tokyo or Seoul, because we are afraid of what 
might happen in Los Angeles or Guam or any other place? How do 
we reassure our allies?
    Ms. Thornton. Yes, thank you, Ranking Member. I think we 
have been working very, very closely with both South Korea and 
Japan, but also with all the other counties in the Asia-Pacific 
region on confronting the North Korea challenge. Obviously, we 
have a very close and continuing conversation with both Japan 
and Korea, not just the State Department, but the Department of 
Defense, on managing our alliances. Obviously, we have been 
talking to both Japan and Korea, as the chairman mentioned, 
about additional defensive needs and capabilities that they may 
have, that they want to move ahead on. And so, I think the 
reassurance that we have been providing them with, and the 
constant close communication with them, and with others in the 
region, has been of significant reassurance to them about our 
ongoing commitment to defense of our allies.
    Mr. Engel. Thank you very much. Secretary Billingslea, 
could you identify the top, say, 25 firms that compose North 
Koreans illicit network? And if so, would you be willing to 
provide that information to this committee in classified form, 
if necessary?
    Mr. Billingslea. Ranking Member, yes. We would be pleased 
to have a classified discussion with you on a number of North 
Korean entities that we are actively targeting. However, once 
we choose to move with designations and blocking of assets and 
so forth, we would want to keep that kind of information very 
close hold until we are ready to move so that the money doesn't 
flee in advance of our actions.
    Mr. Engel. Okay. I think it would be interesting in this 
committee for such a gathering, so we will be in touch with 
you. We will do it together, the chairman and I.
    Let me ask you about these entities. If Beijing and the 
other relevant governments haven't taken sufficient action to 
close these entities and curb their activities, have we taken 
action to designate these entities under U.S. law?
    Mr. Billingslea. Yes, sir, we have. We have done a couple 
of waves of that under this administration. Our August 22 
actions that I referenced were probably the most noteworthy, 
and are definitely a signal of things to come.
    Mr. Engel. It is my understanding that these entities 
operate in China in a small number of the jurisdictions. Have 
we informed Beijing of the activities of these entities and 
communicated the expectation of the U.S. Government that their 
actions be curbed?
    Mr. Billingslea. Yes, sir. Both the Department of the 
Treasury and the Department of State are in repeated 
communications with our counterparts in China, often very 
specifically with respect to entities that we believe are 
associated with the North Korean regime, and we make very 
specific requests for action on these entities.
    Mr. Engel. Thank you. Look, this is a problem that goes 
back to a number of administrations before this one, and the 
President did inherit a complex and intractable foreign policy 
in North Korea, but his mixed and inconsistent messaging is 
self-inflicted--it is a self-inflicted wound. Again, I don't 
see the purpose of arguing with South Korea on trade at a time 
when we need to show strong and resolve.
    So let me ask you this: I have so many questions to ask, I 
never can get them in in a short period of time. But let me go 
back to you, Secretary Billingslea, the chairman mentioned 
several large Chinese banks in his remarks. China Merchants 
Bank was one of them. Have we taken action against them, and if 
we haven't, why haven't we?
    Mr. Billingslea. So, Congressman, we have taken action 
against Bank of Dandong, as was discussed earlier, which we 
believe is a money laundering concern associated with North 
Korea. And our actions have had a very clear effect on that 
bank's operations. That is a signal of our intent to move 
forward with expunging from the international financial system 
any financial institution which is taking insufficient action 
from an anti-money laundering standpoint against North Korea.
    We believe that the next most important thing to do here is 
to, very specifically, target and expose those individuals who 
are the financial facilitators for the North Korean regime who 
set up these elaborate front and shell company structures, 
which are then used to get the bank accounts to launder the 
money. That is a priority focus area for us, and we are driving 
very quickly forward on that matter.
    Mr. Engel. Thank you. Secretary Thornton, did you want to 
add something to----
    Ms. Thornton. Yeah. I just wanted to note for the committee 
that the Chinese have announced in the last couple of days, 
measures against all of their big banks operating, particularly 
in northeast China, issuing warnings and prohibitions about 
opening accounts for North Korean actors. So they are actually 
feeling some pressure on this and making public statements.
    Mr. Engel. One quick thing. You both would agree that any 
kind of resolution or partial restitution of this crisis has to 
go through China, that it is virtually impossible to not 
involve China. China, I think we all think is the one country 
that can influence North Korean behavior. Do you both agree 
with that?
    Mr. Billingslea. I do.
    Mr. Engel. Okay. Thank you. Thank you, Mr. Chairman.
    Chairman Royce. Thank you, Mr. Engel. We go now to Mr. 
Chris Smith of New Jersey, whose subcommittee leads our work on 
human rights.
    Mr. Smith. Thank you very much, Mr. Chairman, for your 
leadership, and for putting together this important hearing. 
And I do want to thank our distinguished witnesses for 
painstakingly working the details of this. It is an extremely 
difficult fight, and I want to thank you for what you are doing 
every day to make a difference.
    I also want to express my deepest respect to Ambassador 
Haley and the administration for drafting Resolution 2375. As 
you have pointed out, the toughest sanctions ever meted out 
against North Korea. My hope is that China and Russia will 
comply with the terms and conditions, and you might want to 
speak to your expectations about that, because obviously in the 
past, it has been lackluster in many ways.
    I would also appreciate your thoughts on how you judge the 
success or failure of strategic patience, and whether or not 
you thought that aided and got us to where we are at now, or 
was this inevitable anyway? For many, there is a significant, 
and I think a profoundly significant, under-appreciation for 
Juche, the dictatorship cult, deification of Kim Il-sung. I 
read books about it. I have talked to many of the diaspora and 
refugees who speak, and they say: ``You Americans don't get 
it.'' The worship of Kim Il-sung is so profound, so deeply 
embedded, and it does lead to a fanaticism that rivals ISIS-
like fanaticism about what they would do for their leader, the 
great leader, going back, and now the current leader.
    Do you think an information surge--there is nothing that 
precludes us from broadcasting, despite jamming capabilities 
that they might have. Can de-mythify the Kims because the big 
lie has certainly been imbedded in the hearts and minds of so 
many North Koreans for so long?
    Every time I talk to a group of defectors, and I ask them 
that question, they explain eloquently about how from the 
youngest age right up--and those expressions when one of the 
leaders die, and the tears and people throwing themselves on 
the ground, it is not fake. It is fanaticism. And when it comes 
to the military, that means that that fanaticism will be 
carried out with horrific consequences for those that are 
defending liberty in South Korea and elsewhere.
    Finally, we know that China subsidizes North Korea's bad 
behavior. It enables torture of asylum seekers by repatriating 
those who escape to China, in direct contravention of the 
refugee convention, and provides Kim Jong Un needed currency by 
employing thousands of trafficked workers. And I am wondering 
if the Department is looking at, with regards to China, 
imposing Magnitsky-like sanctions against those who are 
complicit in those crimes?
    Even the U.N. Commission on Inquiry for North Korea 
recommended that sanctions be used to target individuals. We 
have got the law. And I hope that is something that is under 
active consideration, and hopefully we will hear soon about 
individuals being so targeted. Ms. Thornton.
    Ms. Thornton. Yeah, thank you very much. I think, you know, 
of course, the U.S. State Department has been very concerned 
about the egregious human rights situation in North Korea for 
decades. We have had a special representative working on these 
issues. We have worked very closely with him. I think we have 
made some good progress, or at least we have taken a number of 
very significant actions in this area, and will continue to do 
    I think the question of increasing information access 
inside North Korea is one that we certainly have looked at and 
are working on, and whether we can do more there, I think we 
are always looking at whether we can do more and what we can do 
more effectively. But I think, from my standpoint, one of the 
biggest ways we can get people inside North Korea to question 
what the regime is doing is by making it very difficult for 
them to pay the military and to provide for their citizens, and 
I think that is really what we are very focused on, in addition 
to trying to knock down the proliferation networks that are 
contributing to the weapons program. So there is a litany of 
egregious behavior across the board, and we want to go after 
every single aspect of that. But I think looking at cutting off 
the economic flows to North Korea is another way of----
    Mr. Smith. Of course, that would include the complicity of 
Iran with the ballistic missile program in North Korea?
    Ms. Thornton. Sorry, I didn't get the connection.
    Mr. Smith. The cooperation between the Iranians and 
Pyongyang when it comes to ballistic missiles, that was 
something that I and others asked when the Iran deal was being 
contemplated. And, unfortunately, that was left off the table 
in the final agreement, that the concern is that that 
cooperation continues today, and I hope that that is something 
that is very aggressively being pursued as well.
    Ms. Thornton. Yeah. We are certainly looking at that.
    Mr. Billingslea. Yes, sir.
    Mr. Smith. But you didn't want to speak to Juche?
    Mr. Billingslea. Well, first of all, Congressman, your 
leadership on human rights matters has been--for quite a long 
time. I had a chance to work for you when I was a staffer on 
the Senate Foreign Relations Committee back in the 1990s under 
Chairman Helms in those days. Again, I appreciate the stand 
that you take on these matters.
    We are very specifically looking at a number of individuals 
in North Korea who are engaged in egregious, outrageous human 
rights abuses. This matter of Juche, I think you have 
articulated it exactly correctly. However, I am not sure that 
the cult personality necessarily extends to all of the elites 
right around the dear leader. He very much depends upon this 
hard currency revenue, as the chairman noted, to maintain his 
opulent lifestyle and the people around him. And so the extent 
to which draining his ability to generate hard currency not 
only constricts his ability to engage in WMD and missile 
programs, but it also presumably increases the fragility of the 
regime around him. This is, as we would say, a twofer in our 
    Chairman Royce. Mr. Brad Sherman of California.
    Mr. Sherman. Soon, North Korea will have more nuclear 
weapons than they feel is absolutely necessarily to defend 
themselves from us. But they will need hard currency. They 
might prefer actual cash currency. Iran is having some 
constraints on its ability to develop nuclear weapons. Mr. 
Secretary, do we have any understanding with China that nonstop 
flights between Pyongyang and Tehran will be forced to stop for 
fueling, or do we have anything else that would prevent this 
obvious economic deal?
    Mr. Billingslea. I will defer to the State Department on 
the specific discussions on Air Koryo and flights in----
    Mr. Sherman. Right.
    Mr. Billingslea [continuing]. And from North Korea. I would 
also, Congressman, note that, as we move forward on these two 
    Mr. Sherman. I am not asking--I have very limited time. Do 
we have anything or not?
    Ms. Thornton. I know that we have limitations on air 
refueling. I know the Chinese have refused to refuel. So there 
is pressure on----
    Mr. Sherman. No, I am not asking--I am saying, do we have 
any understanding with China that there will be nonstop, no 
refueling planes going from Tehran to Pyongyang loaded with 
currency or coming back with a nuclear weapon?
    Ms. Thornton. No, we don't.
    Mr. Sherman. We don't. Okay.
    Ms. Thornton. A nonstop plane from----
    Mr. Sherman. So we have one country that has over $1 
billion in Saran wrapped hard currency. And we have another 
country that, if the Assistant Secretary's work is done well, 
will need $1 billion in currency and will have quite a number 
of nuclear weapons that they could sell.
    Folks, I have been coming to this room for 20 years, and 
not much has changed. We have Ileana smiling down upon us; that 
is good. We got some electronics. But for 20 years, 
administrations have been coming here and telling me that we 
don't have to make any concessions to North Korea, we don't 
have to do anything that would make any single American company 
upset, and we are going to make the American people safe. And 
for 20 years, I have been hearing that over and over again. I 
hear that we are going to have unprecedented sanctions, which 
means that we found a few more companies to sanction, just as 
they have invented a few more companies and created them. 
Whether we can list them faster than they can create them, I 
don't know. But the fact is that North Korea's real GDP has 
grown 50 percent in the last 20 years.
    Assistant Secretary, if you were successful with your 
sanctions, you might just cause them not to increase their GDP, 
which means they still have 50 percent more than they found 
necessary to hold on to power back in 1997. But while we 
haven't made the American people safer, we have met the 
political objectives here in the United States. We don't 
threaten China, even a little bit, with country sanctions, 
because that would be politically difficult for the United 
States to do. We don't adopt reasonable objectives, like a 
freeze in the North Korean program, because that would be 
politically difficult to do.
    What we do is what we have been doing--for 20 years, and 
then Chairman Royce has always come up with this or that better 
sanction. Sometimes his ideas are listened to; sometimes they 
are not. But there is never enough pressure on the North Korean 
regime to cause regime-threatening levels. This is a regime 
that survived the famines in the 1990s, late 1990s. Now their 
GDP is higher than it has been--it has gone up just about every 
year. And China is not going to allow us to put regime-
threatening pressure on the North Korean regime. They may, you 
know, punish them a little bit for what they are doing and how 
they are doing it and how disruptive they are and how headline-
grabbing they are.
    But, Mr. Assistant Secretary, do we even have a plan for 
threatening China with country sanctions, tariffs on all goods? 
Or is it just a matter that, ``Well, your number seven bank 
won't be able to do business in the United States, so your 
number eight bank and numbers one through five banks will''? If 
you were running a retailer, would you think there was the 
slightest risk of your supply chain to China because of China's 
unwillingness to engage in the kinds of sanctions necessary 
just to get a freeze of the nuclear program?
    Mr. Billingslea. Congressman, I think you raise a good 
point. And the chairman noted that China is central to this 
matter. Ninety percent of North Korean----
    Mr. Sherman. And we are not doing enough to force them to 
change their behavior, which is to punish North Korea a little 
bit for being a little bit too flamboyant in their actions but 
to make sure that the regime can survive. And this regime won't 
even agree to a freeze of their nuclear program unless you have 
something relatively, at least halfway, toward regime-
threatening sanctions.
    Mr. Billingslea. Yeah, I am not sure I agree with that. We 
    Mr. Sherman. You think the regime would give up its nuclear 
program, even if they said, well, we can survive these 
sanctions, but we care so much about our people that we are 
going to--we care about our GDP, we might----
    Mr. Billingslea. No, I wouldn't speculate on regime thought 
processes. What I would focus on is the Chinese as the center 
of gravity here. And I think that--in fact, I know that, from a 
tempo standpoint and from a pressure standpoint, the pace of 
action that we have taken, even on my----
    Mr. Sherman. It is unprecedented, just like the last 19 
years people have sat in that chair and told me it is 
unprecedented. But it has certainly not been enough stop----
    Chairman Royce. Will the gentleman yield?
    Mr. Sherman. I will yield.
    Chairman Royce. I think the gentleman is raising exactly 
the bottom-line question here. In other words, we are 
deferential here to a point, but it has been a long time since 
the 1994 framework agreement with North Korea. It has been a 
long, long time of waiting for China to comply with the 
sanctions we pass and, frankly, with the sanctions that the 
United Nations pass.
    As you have just laid out for us with the charts that you 
provided, China understands that that coal is coming, 
circumventing the sanctions, and being unloaded, just as they 
understand that these banks are not complying with the 
provisions that have been passed by the Security Council.
    I think that Mr. Sherman raises a point. I have only seen 
once, in 2005, in response, as I said, to North Korea 
counterfeiting our currency--and that power was soon taken away 
from the Treasury--that I ever saw anything that cut off hard 
currency into the regime. And that was because we didn't give 
anyone an option, anywhere. If you were doing business, we were 
shutting down those institutions.
    So I would just say this is where the discussion needs to 
go next if there isn't full compliance with the sanctions that 
the U.N has passed, because what is at risk is our national 
security. And there is only one way to shut a program down with 
a country like North Korea that doesn't have its own revenues. 
And I thank the gentleman from California for raising the 
point. And I yield back to him.
    Mr. Sherman. I will just say that, for 20 years, we have 
talked about company sanctions instead of country sanctions. 
For 20 years, China has carried out a policy where they smile 
at us but they have done enough with North Korea so that their 
GDP is 50 percent higher in real terms. That is much better 
economic growth than we have achieved. So the sanctions have 
not prevented a high level of economic growth. And my guess is 
that we will continue the policies that we have in the past, 
perhaps at a louder volume.
    And I would finally point out that we have to also remember 
how small the North Korean economy is, how difficult it is to 
squeeze. Yes, we are trying to go after their oil, but they use 
about the same amount of oil as 150 gas stations, total, the 
whole country. That is less than there are on Ventura 
Boulevard. And, of course, they can liquify their coal and use 
that in lieu of oil. So it is going to be tough to put this 
regime under enough pressure to even get a freeze. And the idea 
that we would ever get this regime--and having seen Saddam, 
having seen Qadhafi--to actually give up its nuclear weapons.
    I yield back.
    Chairman Royce. We go to Mr. Dana Rohrabacher of 
California, chairman of the Europe, Eurasia, and Emerging 
Threats Subcommittee.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman. And 
thank you and Congressman Engel for providing the leadership on 
this committee to be dealing with issues of this magnitude. 
Thank you very much for your responsible leadership.
    I share my colleague Mr. Sherman's frustration and 
skepticism that was just expressed. Let me note, my father was 
a Korean war veteran. And I would hope the very last thing that 
is on anybody's mind is to try to exercise more influence by 
putting more American troops in South Korea. That is not the 
path to a solution to this problem. So what are the solutions? 
I mean, obviously, we are being told, even from everything you 
are saying--in terms of economic sanctions, I agree with Mr. 
Sherman. I am very skeptical that any of that is going to have 
    I remember being here and sitting a little bit over there 
at the time when President Clinton proposed and passed through 
this Congress a plan that would give the North Koreans billions 
of dollars of American assistance. Of course, we just did that 
with Iranians now too, with the same idea, that we are going to 
take some bloodthirsty tyrants and we are going to pay them off 
by giving them some sort of aid program for their countries.
    So what is the solution? First of all, what is the 
challenge? Am I mistaken that I have heard quotes from the 
official head of the North Korean Government threatening to 
rain mass destruction of some kind upon the United States? Has 
he actually made threats to in some way kill millions of 
Americans with a nuclear attack?
    Ms. Thornton. I don't know if he said those specific words, 
but there certainly have been a litany of threats, including at 
Guam, including videos showing, you know, bombs raining on 
American cities. So I think----
    Mr. Rohrabacher. Okay. So he has made it clear that he is 
willing, as the leader of that country, to murder millions of 
Americans with the technology. Let me note, then, that I would 
hope, while we do not consider putting U.S. troops in South 
Korea as a solution, I would hope that we would be willing to 
use force, which is something that nobody seems to want to 
mention. And I think this is perhaps the only thing people like 
that understand.
    And so I would suggest--I won't ask what type of force has 
been ruled out. And I am sure the administration has got the 
parameters of what type of force they are willing to use. But I 
would certainly think that the use of defensive forces--and, 
again, thank you, Ronald Reagan, for insisting that we have 
antimissile systems available.
    I would hope that the next time the North Koreans launch a 
rocket, especially one that will traverse over our ally Japan, 
I would hope that we shoot it down as a message to the North 
Koreans and to other people, like in Japan, who are counting on 
us. And unless we demonstrate we are willing to use force, 
there is no reason for them to believe we will.
    Also, not only an antimissile-defense type of approach, but 
I would hope that, if indeed another missile is launched, or 
they are preparing for a launch, that we conduct a cyber attack 
on North Korea. And, yes, it is a very small economy and a 
small country. A cyber attack against that type of threat 
should be effective, but it is a use of force without major 
loss of life, which is what Ronald Reagan talked about all the 
time. We don't want to be put in a position where our 
alternative is murdering millions of people who are basically 
the victims themselves of a totalitarian regime.
    So I won't ask what parameters we have in the use of force, 
but let me just note, I don't believe that sanctions alone will 
have an impact on tyrants that murder their own family and have 
been so abusive and murderous to their own people. And I don't 
believe buying them off, as President Clinton tried to do--now 
we are stuck with this--down the road from that deal, we now 
have this. And those billion of dollars of assistance we gave 
North Korea, I would imagine, provided them other money that 
they could put into developing their own nuclear weapon system.
    So, with that said, good luck to you all. Thank you very 
much. And thank you to our leadership in this committee. We are 
all Americans in this. Let's hope for the best but prepare for 
the worst.
    Chairman Royce. Thank you, Mr. Rohrabacher. We now go to 
Mr. Gerry Connolly of Virginia.
    Mr. Connolly. Thank you, Mr. Chairman. And welcome.
    We talk a lot about bipartisanship, and we want bipartisan 
on this committee and in our foreign policy. But we don't get 
bipartisan when we ignore history or when we whitewash the 
statements and actions of the current President with respect to 
North Korea.
    We have a model that works--of course, a lot of people on 
this committee didn't support it--and that is called JCPOA, the 
Iran nuclear agreement. They have met the metrics. Recently, 
the United Nations certified they are complying. It rolled back 
a nuclear program. It involved cooperation not just with our 
allies but with our adversaries, Russia and China. And it had 
Iran at the table.
    To what end is U.S. policy? What I didn't hear from my 
friends on the other side of the aisle, including the chairman 
in his opening statement, a powerful opening statement--I 
support tougher sanctions, always have. But it is one part of a 
policy, not the whole policy. As the Iran experience 
demonstrated, there has to be some reward for compliance and 
cooperation at the end of the day, or you are left with a 
policy only of talking loudly and carrying a stick.
    We haven't talked about the fact--the ranking member did--
that the President of the United States, in the midst of this 
crisis, threatened our ally, the most vulnerable party to North 
Korea's actions, South Korea, with abrogation of a free trade 
agreement we worked so hard to get. He accused the new South 
Korean President of appeasement. He threatened to cut off trade 
with any country that trades with North Korea. Well, that list 
is 80, including allies like India and Germany, Portugal, 
France, Thailand, the Philippines. Are we, in fact, going to 
cut off economic relations or trade with 80 nations? It is an 
empty threat. He talked about a response by the United States 
of fire and fury, but, frankly, the policy looks more like 
fecklessness and failure.
    Ms. Thornton, is it the policy of the United States 
Government to abrogate the free trade agreement with South 
Korea? And has anyone at the State Department looked at the 
negative consequences of such an action, especially at this 
    Ms. Thornton. Thank you, Mr. Connolly. Yes, we have looked 
very carefully at the Korea free trade agreement, KORUS. We are 
currently undergoing a very rigorous review of all the 
provisions. The United States Trade Representative recently 
held a----
    Mr. Connolly. My question--I am sorry. I am limited in 
time. Forgive me. My question is direct: Is it the position of 
the State Department that abrogating the free trade agreement 
with South Korea would be helpful in our diplomatic efforts and 
in our efforts to respond to the North Korean threat at this 
    Ms. Thornton. No. I think what we would like to do is work 
to improve the trade agreement at the same time that we work 
with the South Koreans, obviously, on facing the North Korean--
    Mr. Connolly. Is it the policy of the State Department that 
the new President, President Moon, of South Korea is engaged in 
a policy of appeasement in any respect with respect to the 
    Ms. Thornton. No. I think we have been working very hard to 
get the South Koreans to come around and be on the same page as 
we and the rest of our allies. And they have come around very 
nicely, I think.
    Mr. Connolly. Thank you. Mr. Billingslea, like you, I also 
served on the Senate Foreign Relations Committee and worked 
with your former boss, Mr. Helms. I was on the other side of 
the aisle. But we actually made a lot of music together 
sometimes, which always surprised the Reagan administration and 
the Bush administration afterwards.
    You talked a lot about China. So China has been violating--
and you provided some graphic evidence of that--with impunity, 
violating sanctions other flags shipping coal and providing 
badly needed foreign exchange for the North Korea regime. They 
just signed on in this unanimous U.N. resolution a new round of 
sanctions. Do we have any reason to believe that that would 
signal a change in Chinese behavior for the better, or is it 
another empty promise that will be violated with impunity?
    Mr. Billingslea. To be determined.
    Mr. Connolly. Can you speak louder into your microphone?
    Mr. Billingslea. Sorry, Congressman. It is to be 
determined. The reason I wanted to highlight for you the 
evasion schemes is that maritime enforcement now becomes 
crucial. With the two U.N. Security Council resolutions that 
are in effect, not sanctions but embargoes, complete embargoes, 
at least on paper, of coal, iron, lead, now textiles, seafood, 
gasoline, maritime enforcement of those U.N. Security Council 
resolution decisions, which are binding on all members of the 
U.N., that is going to be crucial going forward.
    Mr. Connolly. And if the chair would just indulge me for 
one followup question. So, at the end of the day--and either or 
both of you can answer. So let's say, by tightening sanctions, 
which I favor, we get North Korea to the table saying 
``Uncle,'' what do we give them in return? What are we prepared 
to do to entice North Korea, that there is, you know, a pot of 
something at the end of the rainbow if you freeze the program 
and start to reverse it under international observation?
    Ms. Thornton. I think----
    Mr. Connolly. Because isn't that the goal?
    Ms. Thornton. I will just be quick. I think the Secretary 
of State has been pretty clear in public remarks that we would 
be willing to look at economic enticements, at development 
opportunities for their economy, at their security concerns, 
and other things that we have talked about during negotiations 
with them in the past. And so I think all of that would be on 
the table, assuming we could get to--you know, we don't want to 
pay for negotiations or negotiate to get to the negotiating 
table. That is where we are right now.
    Mr. Connolly. At the end of the day, I will give you one 
word that has to guide U.S. foreign policy in all respects but 
especially North Korea. That word is ``efficacy,'' which is 
defined as the ability to produce a desired and intended 
result. And I think that is also to be determined, Mr. 
    Thank you, Mr. Chairman, for your indulgence.
    Chairman Royce. Thank you very much, Mr. Connolly.
    We now go to Mr. Steve Chabot of Ohio.
    Mr. Chabot. Thank you, Mr. Chairman. And I want to again 
thank you and the ranking member, as others have said, for your 
at least attempts to get sanctions worked up. I think it is 
something worthwhile to pursue.
    That being said, just one thing I wanted to make sure that 
I am accurate on this. Ninety percent, perhaps more, of what 
North Korea, the regime especially, needs to survive they get 
in one source or another from China. Is that--I am seeing 
nodding. Ms. Thornton, would you agree with that also? Okay.
    That being said, obviously, China is the key, has been a 
long time, continues to be. It seems to me there are two things 
which could get China's attention. They have given us lip 
service for decades now, but one of those things is the trade 
with the U.S. is significant, and it seems that if we 
literally--I mean, some sanctions on banks, that may help a 
little bit, but it is not going to have the result, I think, 
that we all want, and that is to avoid military action and get 
North Korea to back off this march to madness in their nuclear 
    So one way is if we actually did cut off trade. And, of 
course, if we did that, would it have an adverse impact on the 
American economy? Of course it would. However, I would say that 
pales in comparison to the impact on the American economy if we 
see a thermonuclear device go off in Seattle or San Francisco 
or L.A. Or New York or Washington. So that is one thing that I 
think could actually get China's attention.
    I think the other thing--and, Ms. Thornton, you sort of may 
have been at least thinking about this when you said that we 
are discussing with Japan and South Korea what they may want to 
move ahead on. And I don't know if this is what you had in mind 
or not, but it is certainly what I have in mind and have said 
this for years: They do not want Japan or South Korea to have 
their own nuclear programs. And I have thought for a long time 
that we should at least be discussing that with them. And I 
think the discussions alone could have gotten their attention, 
to get them to put pressure on North Korea to back off. It may 
be too late for that now. But could you comment on those two 
items which perhaps could get China to actually put sufficient 
pressure on North Korea to back away from this madness?
    Ms. Thornton. Sure. Well, I mean, we are certainly looking 
at every option to put more pressure on China. We are also 
using all of our global partners to speak up and also, from 
their perspectives, put pressure on China, because we do see 
China as the key to the solution of this problem, if we can get 
    As for cutting off trade, obviously that would be a huge 
step, and there are a lot of ramifications of that. I think 
going after entities and banks is a way of going more directly 
after the North Korean angle here, but I agree with you that, 
trade is preferable to seeing any kind of military 
confrontation, especially one that would involve people in the 
United States.
    But on the issue of defenses in Japan and South Korea, we 
have certainly been talking to Japan and South Korea about 
beefing up their defenses and their ability to, themselves, 
take action in the event of an attack. And even those 
discussions have gotten China's attention. You probably know 
the Chinese have been very vocal about their opposition to the 
THAAD deployment in South Korea, which we have moved ahead on 
now and gone ahead and deployed over and above their 
objections. And we have made clear that the Japanese are 
seeking additional defensive systems to enable them to ward off 
a direct attack from North Korea. And it is quite clear, I 
think, already to the Chinese that this is an area that is 
going to be further developed if we can't rein in the threat 
from North Korea.
    Mr. Chabot. It is my view that, short of one of those two 
actions, I think we are going to continue down this path where 
Kim Jong-un will continue to move forward on this nuclear 
program. And that will leave only the military option, and 
there is no good to come from that. We know if we take that 
action, they can target Seoul, and literally tens, maybe 
hundreds of thousands of lives could be lost, including 
American lives. So that is the last resort, although it may 
ultimately come to that.
    Or the alternative--some people are suggesting now, as 
well, we have a nuclear China, we have a nuclear Russia, we 
don't like that, so maybe we end up with a nuclear North Korea. 
Either one of you, why can we not allow that to happen? How are 
they different?
    Ms. Thornton. A lot of times, people talk about the North 
Koreans needing a nuclear program for their own defense. The 
fact of the matter is that there has been basically a mutual 
deterrence in effect since the end of the Korean War. They have 
a conventional position that allows them to target Seoul. And 
so the idea that they need nuclear weapons for their own 
defense, when there has never been a retaliation for any of 
their provocative, hostile, or even kinetic actions that they 
have taken, is a bit of a bridge too far.
    So the concern is that they are pursuing a nuclear program 
in order to use that program to conduct blackmail and hold 
other countries hostage and continue to take even worse sorts 
of steps in their behavior. Proliferation is another major 
concern, of course. It undermines the entire global 
nonproliferation system and would be, we presume, ripe for sale 
and proliferation around the world. So I think two major angles 
    Mr. Chabot. Thank you. My time has expired.
    Chairman Royce. Mr. David Cicilline of Rhode Island.
    Mr. Cicilline. Thank you, Mr. Chairman. Thank you to our 
witnesses for being here.
    I start with you, Ms. Thornton. You said, ``We will never 
accept North Korea as a nuclear state.'' What did you mean by 
that? I mean, aren't they already a nuclear state?
    Ms. Thornton. No, we do not recognize them as a nuclear 
state. And----
    Mr. Cicilline. What does that mean?
    Ms. Thornton. We do not recognize them as a nuclear weapons 
state. We don't recognize their program, and we won't consider 
them to have nuclear weapons. We are pursuing denuclearization.
    Mr. Cicilline. Well, we can't imagine it away. Either they 
are a nuclear state or they are not. The recognition of one--I 
am not understanding that point. I mean, we have to have a 
realistic context before we can shape smart----
    Chairman Royce. Will the gentleman yield for just a second?
    Mr. Cicilline. Sure.
    Chairman Royce. Because there is an additional complexity 
    Mr. Cicilline. About delivery.
    Chairman Royce. Exactly.
    Mr. Cicilline. Yeah.
    Chairman Royce. And I just wanted to make that point.
    Mr. Cicilline. No, no, I understand, but--okay. Let me move 
    Mr. Secretary, you said that U.N. Resolution 2371 prevents 
55 percent of refined petroleum products from coming into North 
Korea and that new sanctions prevent $\1/2\ billion of coal, 
which leaves another $\1/2\ billion of coal and about 45 
percent of petroleum products. Am I understanding that our 
sanctions don't reach the balance of that? And if not, why not?
    Mr. Billingslea. So, Congressman, a couple of things. So 
all coal is prohibited to be transacted. That was under the 
    Chairman Royce. Mr. Assistant Secretary, just pull the 
microphone a little closer.
    Mr. Billingslea. Sorry. So, Congressman, it is not allowed 
to trade in North Korean coal, period, nor in iron, iron ore, 
lead, lead ore. North Korean----
    Mr. Cicilline. So those percentages relate to 
    Mr. Billingslea. The 55-percent number I gave you is kind 
of the fuzzy math done on how much gasoline versus crude oil is 
imported today into North Korea from China.
    Mr. Cicilline. Okay. Thank you. I think we have heard from 
a number of my colleagues in response to those questions about 
pretty clear noncompliance by the Chinese. The U.N. experts on 
North Korea in February found that they were using this 
livelihood exception to trade banned goods and allow companies 
to send rocket components to North Korea.
    And you said, Ms. Thornton, and I think also Mr. Secretary, 
that we need to see that happen--that is, compliance by the 
Chinese. You described the Chinese as the center of gravity. 
And then, Ms. Thornton, you said, if China doesn't comply with 
the sanctions, we will use the tools at our disposal. What are 
those tools, and why aren't we already using them?
    I mean, otherwise, these sanctions sound good in a press 
release, but if they are not actually being honored by the 
parties, they are not effective, as Mr. Connolly said. So what 
are the tools that you intend to use, and why aren't we already 
using them?
    Ms. Thornton. Well, one of the things to remember--I think 
the Assistant Secretary mentioned this--is that North Korea has 
been under sanctions for many decades. So their networks--it is 
a criminal enterprise, and their networks are deeply embedded, 
and they have designed them to escape detection. So it is a 
little bit complicated to go after these things.
    But what I meant when I say using our tools, we have these 
international sanctions regimes. The international community 
has signed up to it and is obliged to enforce that. We have a 
running discussion with many of the countries around the world 
on information we have about what we find as illicit networks 
and ask them to go after those. If they don't, then we will use 
our domestic authorities to sanction those entities.
    Mr. Cicilline. I guess my question is, I think most 
military experts would acknowledge that there is not a good 
military option. We can talk about it, but there actually isn't 
one. And so, if we surrender the use of the sanctions regime to 
produce the result that we want, by not using every tool that 
is available to us, aren't we in the end acquiescing to North 
Korea's nuclear capabilities?
    Ms. Thornton. I think our strategy is to ramp up the 
sanctions regime, and that is exactly what we have been doing. 
We have had two unanimous U.N. Security Council resolutions in 
2 months. That is unprecedented.
    Mr. Cicilline. No, no, I understand. But they have to be 
implemented in a meaningful way and fully. Otherwise, they are 
nice resolutions, but it sends the wrong message----
    Ms. Thornton. But that is exactly----
    Mr. Cicilline [continuing]. It seems to me, to North Korea 
if they don't see that that is real engagement by the Chinese 
to make these sanctions work.
    Ms. Thornton. Right. But that is exactly what we are 
working on. And I think, on sanctions regimes, a lot of people 
say the sanctions won't work either. But in past cases where we 
have used sanctions, I just want to note, you are a chump if 
you are implementing sanctions and they are not working until 
you are a genius when they do.
    Mr. Cicilline. No, no. I think sanctions do work if they 
are implemented. My last question is this. It seems to me that 
this suggestion that China is the center of gravity is right 
and that the only way that we will get China to fully implement 
the sanctions regime is for them to conclude that it is in 
their own interest to do that. And that will only happen when 
they arrive at the point that their fear of a unified Korean 
Peninsula aligned with the United States is outweighed by their 
fear of a military conflict on the Korean Peninsula. And I 
think that is the calculation.
    And I guess my question is, what are the strategies that 
the administration is pursuing that bring China to that point 
where they conclude that it is in their interest to enforce the 
sanctions because the danger of a conflict on the peninsula is 
greater than their fear of some alignment by a unified Korean 
Peninsula with the United States? Or do you agree or disagree 
with that assessment? And I would ask Mr. Secretary and Ms. 
    Ms. Thornton. I think that that is right. And I think we 
have seen the Chinese moving in their system, for them, pretty 
swiftly toward a recalculation of what they are worried about 
on the Korean Peninsula. They see North Korea's actions 
undermining their own security through the beefing up of 
defenses in their region. They are certainly very alarmed at 
North Korea's behavior. And the explosion of the sixth nuclear 
test, the hydrogen bomb, right on their border is very 
concerning to them.
    So I think we see them moving in this direction. It is not 
fast enough or sort of deep enough for us to be satisfied, but 
we are certainly pushing them in that direction. And we have an 
ongoing conversation with them about this at the highest 
    Mr. Billingslea. I would also add that, as the chairman has 
pointed out, the Banco Delta Asia sanctions had a crippling 
effect on the regime, but that was more than a decade ago. We 
have for the first time in more than a decade taken action 
against, in this case, a Chinese bank. This was Bank of 
    That was a very clear warning shot that the Chinese 
understood. And we are in repeated discussions with them that 
we cannot accept continued access in the international 
financial systems by North Koreans through their financial 
    Mr. Cicilline. Thank you. And I thank you, Mr. Chairman. I 
yield back.
    Chairman Royce. Mr. Ted Yoho is chairman of our Asia-
Pacific subcommittee. And he joined us in South Korea and has 
passed legislation to improve our ability to get information 
actually into North Korea. Mr. Yoho.
    Mr. Yoho. Thank you, Mr. Chairman. And I thank you for 
holding this hearing today.
    North Korea's recent provocations are its most dangerous 
yet. In launching a ballistic missile over Japan and detonating 
its most powerful nuclear device to date, the Kim regime has 
shown it is more emboldened than ever before. Kim Jong-un says 
we are backed into a corner. However, I think he is wrong. He 
is getting into a decreasing corner by his actions, and we are 
on the outside of that corner looking in.
    But year after year, successive administrations have failed 
to fully implement the sanctions and China continues 
underwriting DPRK's programs, either financially via trade, 
doing 90 percent of their trade, or through technological 
exchanges, as we have seen with the rocket North Korea launched 
up and we recovered--or not we, but the South Koreans recovered 
the second stage and it was full of Chinese components. So 
China is complicit in this.
    The implementation of the secondary sanctions authorized by 
Congress, as established, that we have done over the past years 
is often controversial, but as North Korea's nuclear technology 
has advanced, the need has become imminent. With these recent 
tests, implementation has been an existential need for millions 
of North Koreans, Japanese civilians, perhaps the United 
States, and really the world community.
    And I find myself agreeing with my colleague Mr. Sherman 
again when he was talking about China. We have been here 
multiple times, his experience of 20 years in this committee, 
hearing the same story over and over again. And my questions 
are going to be focused on what do we do from this point 
    You two are both in the seat that you are watching this at 
a very close level of engagement. You know what is working, 
what is not working. How do we go forward so that we are not 
back here in a year discussing what we should have done? I want 
to know what we did do and what tools you need to move forward 
so that these sanctions really do work.
    Ranking Member Sherman and I both--we wrote a letter both 
to State and to the Treasury providing a list of Chinese banks 
that may have provided North Korean banks with indirect 
correspondence. And I am happy to say that the State Department 
have sanctioned recently--and China has been complicit with 
this and gone along with this--the Agricultural Bank of China 
and the China Construction Bank. These are great, positive 
moves, but there are still 10 more banks that China can 
sanction or put pressure on to stop doing business with North 
    And my question to you: Do you guys have enough tools in 
your arsenal to make sure that the world community--because it 
can't be just us. And that is why sanctions haven't worked in 
the past. It has to be a buy-in from the world community, 
because this is something that is affecting all of the world 
community, to get to a point where we have diplomacy that works 
so that we don't have any kinetic conflicts. Certainly, this 
world does not want to see a nuclear device go off in a 
homeland of anybody's. And this is this generation's fight, to 
make sure this doesn't happen. So, Ms. Thornton, is there 
anything else that you need that would make these other 
countries complicit with the sanctions?
    Ms. Thornton. Thank you very much, Mr. Subcommittee 
Chairman. We definitely believe that the U.N. Security Council 
actions are the most significant actions that we can take on 
the sanctions front, and that is because every country in the 
world is obligated to enforce those sanctions. It gives them 
the legal authority to do so, and it obliges them do so. And it 
opens up a whole sphere of enforcement for us to work with 
other countries on.
    So I think the most significant actions in the U.N., which 
U.N. Security Council--our representative, Ambassador Haley, 
has undertaken, have been really key. The other key, I think, 
authorities are our domestic enforcement authorities, which 
back up the U.N. Security Council----
    Mr. Yoho. Let me stop you there and ask you this. North 
Korea was on the state sponsors of terrorism list. And, 
certainly, we can look at their acts that they have done. In 
fact, you have said that North Korea was using intimidations, 
acts of intimidation--words you used to describe terrorism. So 
when we took them off the state sponsors of terrorism list, do 
you feel it would be important to put them back on that? And 
would it help toughen the sanctions and get compliance by the 
other countries?
    Ms. Thornton. I think the state sponsors of terrorism list 
is another statutory tool that we have, and, certainly, the 
Secretary is looking at that in the context of North Korea. I 
don't know that there are any----
    Mr. Yoho. I am about out of time. Would it be prudent for 
us to----
    Ms. Thornton. I don't know if there are additional 
authorities there that would give us additional tools to go 
after things. I think it would be just another layer. But we 
are certainly----
    Mr. Yoho. Another layer would be good.
    Ms. Thornton. Yes.
    Mr. Yoho. And I appreciate your time. And I am sorry I 
didn't get to you, Assistant Secretary. I yield back. Thank 
you, Mr. Chairman.
    Chairman Royce. Thank you, Mr. Yoho. We go now to Mr. Brad 
Schneider from Illinois, who was also with our delegation for 
our meetings with President Moon and other senior U.S. and 
South Korean officials during that time when the North Korean 
missile was shot over Japan.
    Mr. Schneider. Thank you, Mr. Chairman. And, again, thank 
you for leading that delegation. It was an extraordinary 
opportunity to understand the situation better, to understand 
the threat, but also understand the strategy.
    Today, we have talked a lot about strategy. We have talked 
about North Korea's strategy of accelerating testing, trying to 
miniaturize a weapon and put it on a missile. We have talked a 
lot about U.S. strategy and working within our laws as well as 
the United Nations.
    But strategies follow goals. And we have had some 
discussion of our goals. If I could summarize our goals, it 
seems to be where priority number one is to eliminate the 
nuclear threat by North Korea. A secondary goal is to bring 
stability to the peninsula.
    Ms. Thornton, you talked about what our goals are not. I 
just want to emphasize those. Not regime change or collapse; 
nor do we seek an accelerated unification of Korea or an excuse 
to send troops north of the armistice agreement's Military 
Demarcation Line. We have no desire to inflict harm on the 
long-suffering North Korean people, who we view as distinct 
from the hostile regime in Pyongyang. I think that is 
important. What I would like to ask you is if you could 
succinctly describe, what are North Korea's goals?
    Ms. Thornton. I think it is pretty hard to get inside the 
mind of the North Korean leader, but I think he has been fairly 
clear in public statements that he seeks to complete his 
nuclear weapons program in order to be able to sit down at the 
table with us as a sort of nuclear weapons fully developed 
state and----
    Mr. Schneider. Well, that seems part of the strategy, but 
their long-term goals--Mr. Deputy Secretary?
    Mr. Billingslea. I really do have to defer to State 
Department on this. My job is to drag them to the table through 
economic pressure. But I defer to State Department on any----
    Mr. Schneider. Okay.
    Ms. Thornton. I think that most experts on Korea would say 
that the main, overarching goal--and I think one of the members 
mentioned the Juche philosophy, Representative Smith. I think 
that regime survival, regime perpetuation is pretty much an 
overarching purpose and goal.
    Mr. Schneider. Okay. I mean, that seems to be the shared, 
collective wisdom. How about China? Because they have different 
goals, obviously, than ours, in many ways. How would you 
describe their goals in this dynamic?
    Ms. Thornton. I think China has been also pretty clear in 
their public comments that they don't want chaos, war, or nukes 
on the Korean Peninsula. Those are their stated three main 
goals in this particular issue. Of course, they are also 
looking to maintain stability in their region and to create the 
conditions for further economic development.
    Mr. Schneider. Okay. So it seems that there is this shared 
perspective, at least between the U.S. and China, that 
achieving each of our respective goals--denuclearization, 
elimination of the nuclear threat--we should have--sanctions 
are the path to put pressure on Korea.
    But how do we create--and this is a broad message, maybe, 
beyond here--a clear message for North Korea that the only path 
for survival, the only path for them to achieve their goals is 
through denuclearization, that they are taking the wrong path? 
What off-ramps, what mechanisms can we provide to show them 
that the way they are headed is a risk to their regime, a dire 
risk to their regime, every option being on the table, and that 
there is a different path and that path is open to them?
    Ms. Thornton. Well, it is difficult to do this when they 
are shooting ICBMs, threatening Guam, and exploding hydrogen 
bombs on the border of China. But I think we have been very 
clear in our public statements that denuclearization is the 
goal. We have used both words and actions to try to drive them 
in the direction that we want them to go--public statements by 
us, public statements by many of our partners and allies, in 
messages directly to the North Korean regime but also through 
public messaging, which the North Koreans definitely are 
picking up on, to tell them that denuclearization is the only 
path to survival for the regime.
    And we have been quite explicit about that. We are trying 
to show them that through our deterrence actions, through our 
sanctions actions, through our diplomatic actions. And I think, 
you know, they have a different view so far, but we are 
continuing to press on that.
    Mr. Schneider. And I don't mean this next question any 
other way than the way I am asking it. It really is an honest 
question. Is it better to have a very clear, consistent message 
that you take these steps, this is what we will do, or is it 
better, in your mind, to leave uncertainty and perhaps have a 
mix of messages?
    Ms. Thornton. Well, I think it is good to have consistent, 
clear messages, especially for a regime like North Korea that 
has a very opaque communication system and difficulty, 
probably, for information to reach the top leader, which is why 
we use public messaging in some cases, so that we can be sure 
that he can get it directly. But I think it is also important 
not to take any options off the table so that there is 
sufficient motivation for them to move toward the negotiating 
    Mr. Schneider. Yeah, I would share that. And I am out of 
time. I will ask a question maybe for later, someone else will 
touch on. We talked about the outside pressure in trying to get 
alignment with the U.S. and China in putting pressure on North 
Korea. But I would appreciate the opportunity for further 
discussion on how we create that internal pressure from within, 
not just making it harder for payment of the military, but for 
the public to understand what is really happening within North 
Korea and, in contrast, what the opportunities are without and 
pursuing that different path. And, with that, I thank you for 
the extra time, and I yield back.
    Chairman Royce. Would the gentleman yield?
    Mr. Schneider. Yes. Please.
    Chairman Royce. I think you make a very important point, in 
terms of that focus. And there is another element, I thought, 
with respect to the conversations we have had. This is the 
second time we have talked to a senior North Korean defector 
who said, no, they already have the ability, they are not 
afraid of a South Korean attack or a North Korean attack 
because they have a million-man army on the border and the 
100,000-plus missiles and all the other hardware.
    What the issue is for North Korea is that they feel it is 
an illegitimate government in South Korea; that the founding of 
the Korean Peninsula, when the occupation was over from Japan, 
it should have been unified under the Kim dynasty. And the 
focus of the Kim regime, of Kim Jong-un, is on getting enough 
nuclear weapons, hydrogen bombs, that they can turn to Seoul 
and say, we are going to be reunified, but we are going to be 
doing it under the regime.
    I think that is interesting information in that it comes 
from those who in one case was the head of propaganda for the 
regime. And if that is indeed the calculus, it really 
complicates things in terms of the feelings of the Kim regime. 
Both seemed to indicate that, although that was the focus of 
the Kim family, it may not necessarily be the focus of most 
North Koreans, who tend to understand that that drive to do 
that is what is costing the country its standard of living, its 
ability to give anyone else opportunity. It is solely in the 
interest of the megalomaniac who is currently in power.
    I think that concept is an interesting one when it is 
shared with us by those who were actually part of the North 
Korean regime. But I do think we need to begin the process to 
having hearings to dig deeper into this whole calculus.
    Mr. Schneider. And if I can, I think that is critically 
important. I couldn't agree more. And this is why I was talking 
about goals. If the goal is regime survival, that strategy, 
there is an opportunity to have--one direction. If the goal is 
the submission of South Korea, that is a different--the 
strategy can be the same with the development of nuclear 
weapons, but trying to create an opportunity for engagement is 
entirely different and much more challenging. So I think that 
is a critical conversation to have. Thank you.
    Chairman Royce. Yes, indeed. Mr. Adam Kinzinger of 
    Mr. Kinzinger. Thank you, Mr. Chairman. I just want to 
thank all of you for being here. And, personally, I want to 
commend the President, frankly, for finally taking a tough 
perspective on North Korea; I think, being very open about this 
is the challenge of our generation. We all know terrorism is a 
huge issue, but this is a bigger challenge. This is an 
existential threat, I would say, to the United States, to world 
order, to denuclearization of the world, to nuclear 
proliferation. And, as far as I see it, there are a lot of 
folks, and whether it is here at the hearing or if you watch 
the media, they all say there is no military option. They say, 
well, there is a military option, but not really; it is 
unthinkable, so we will never use it.
    And I look at it this way: In order to actually achieve our 
objectives--and we have almost accepted defeat even prior to 
actually going about these objectives, in some circles. We have 
three areas. Number one is diplomacy, which we are ramping up 
in a big way through economic use, through actual diplomacy, 
everything else. Number two is missile defense, which we would 
obviously need in the case that we have to defend ourselves. 
Number three is a military option. People that understand 
instruments of power and how they work and the various 
instruments of power that our Nation has to understand that you 
cannot do diplomacy with an adversary without a big stick to 
use, whether that is military, whether that is economic, 
whatever, that there has to be on the table basically the 
unthinkable in order to make diplomacy work.
    So, number one, diplomacy is good, but if we are ruling out 
a credible military option, I think it is going to be 
unsuccessful ultimately. The idea of missile defense is great, 
and we need it. But the reality is, if we just back up and say, 
well, as long as we build a missile defense, North Korea will 
be allowed to have a nuclear weapon, I think that leads to 
massive proliferation around the world. How do you tell Iran 
that they can't have a nuclear weapon when the JCPOA is up, 
actually fairly soon, when, in fact, you have just given North 
Korea de facto access to a nuclear weapon?
    And so let me just ask--I will ask a question, Mr. 
Billingslea, to you. So when people go out and they say there 
really is no military option, even though it is unthinkable--by 
the way, the military should be used in doomsday scenarios, of 
which I think this ranks up there with doomsday scenarios--does 
that strengthen your diplomatic hand, does that strengthen your 
ability to get North Korea to the table, or does it weaken it?
    Mr. Billingslea. I think we would be exceedingly unwise to 
take anything off the table. I was a Senate staffer up here on 
the Foreign Relations Committee when the agreed framework was 
negotiated. And that was designed to freeze the Yongbyon 
reactor and so on. And we gave all kinds of heavy fuel oil 
under the Clinton administration. And look where we are now.
    So this administration has made very clear, at the Cabinet 
level and the President himself, that we are not going to kick 
this can down the road. We can't. He is testing advanced 
nuclear designs and ICBMs. It is a matter of time now before he 
mates the warhead to the missile and poses an existential 
threat not just to our friends and allies but to us.
    Mr. Kinzinger. Let me ask you a question to follow up. As a 
prior administration official said--and I don't like to throw 
stones at past administrations, so I am not doing that. But as 
this person wrote in an op-ed, we have to just live with a 
nuclear North Korea, in essence, for me, saying that the prior 
administration was willing to live with a nuclear North Korea.
    Let me ask you a question. If we say, as long as we have 
missile defense, we are unwilling to do what is difficult for 
North Korea, we are unwilling to engage in economic action 
against the Chinese, push the Chinese back in their territorial 
disputes in the South China Sea, whatever. If we do that, can 
you talk about what the rest of the world will look like when 
we de facto accept North Korea as a--even if we don't say we 
have accepted them, if we de facto accept them, what does that 
do when the JCPOA runs out of time, what does that do to South 
Korea, Japan, other countries' nuclear ambitions, and what does 
that do to our moral authority to enforce the nuclear 
    Mr. Billingslea. Well, I will defer to State Department on 
sort of the broader implications, but I would tell you, we are 
not willing to live with a nuclear North Korea. North Korea has 
proven that they are certainly willing to share nuclear 
technology with all manner of pariah regimes, to sell 
capabilities. I think Ambassador Bolton just had an op-ed where 
he pointed out it was a recent anniversary of the Israeli 
strike on a Syrian nuclear facility which was alleged to have 
been constructed with North Korean support, for instance. So 
these are big issues. We are determined to induce the Chinese 
to help solve this problem.
    Mr. Kinzinger. Well, let me commend you on that. And, Ms. 
Thornton, I would give you the time; I am out. So I am not 
ignoring you. I just--the clock ran out. But let me say at the 
end, to reiterate what the Secretary said, I couldn't imagine 
in the situation that Syria is in today, which I think is 
tragic--and I think there has been a lack of action on our part 
to fix that--I couldn't imagine, had they had a nuclear 
program, what we would be looking at today.
    And there is a lot of concern of social instability in 
North Korea. Look, people don't like to be oppressed. They 
won't be oppressed, even in a place like North Korea. What 
happens someday when that government is destabilized and you 
see something? I think these are all important questions.
    And, again, I want to commend you and the administration 
and the State Department for their hard work on this issue. And 
I yield back.
    Chairman Royce. We will go to Congresswoman Norma Torres of 
    Mrs. Torres. Thank you once again, Mr. Chairman, for 
bringing us together for this very, very important and critical 
issue that we have here in dealing with North Korea and all of 
the problems that they have caused most recently.
    I think we pretty much all agree that there is no magic 
bullet in dealing with this regime. And I think that we pretty 
much are in agreement that, so far, all the sanctions and 
everything that we have done hasn't worked. So where have we 
gone wrong? I don't know. Part of that we are trying to address 
here. I think that we have to be pretty realistic that this 
regime that we are dealing with is willing to do anything, put 
its people and the entire world at risk in order to achieve 
what they ultimately want to achieve, and that is a nuclear 
weapon that would come far enough to reach American citizens. 
And we have been talking a lot and calling out Los Angeles--I 
represent L.A. County--San Francisco. We haven't really 
mentioned Hawaii, which is a lot closer, and our territories.
    Another issue that we have neglected to address, and that 
is the consumer issue. We haven't really engaged consumers and 
a more global inclusion to deal with North Korea and China's 
appetite to have slave-type workers working in their companies. 
So, as a consumer, when I am buying products, where is that 
chain of where this product was made and who it was made by? We 
know that many of our products are made in China, but not by 
whom. Correct?
    So, to me, the bigger issue is, are we hitting the right 
targets? Are we being surgical enough to inflict the maximum 
pain on the regime versus inflicting the maximum pain on the 
people of North Korea?
    Congresswoman Wagner and I have introduced the North Korea 
Follow the Money Act, H.R. 3261, which would direct the 
Director of National Intelligence to produce a national 
intelligence estimate of the revenue sources of the North 
Korean regime. My hope is that this bill will make our 
sanctions policy more precise and a bit more effective.
    But I think that we still cannot get away from engaging, 
you know, more people. If foreign governments are not willing 
to engage--everyone is interested in a doomsday clock. It was 
advanced by another 30 seconds in January. And I think that we 
missed another opportunity to talk about what is happening in 
the Korean area more closely.
    I would like to ask if you would agree that a clear picture 
of North Korea revenues--if we need to have a better picture of 
North Korea revenues in order for our sanction to be more 
    Mr. Billingslea. So, Congresswoman, you are always going to 
find that I and the Treasury Department are interested in more 
intelligence, not less. We are an intelligence-driven 
organization, and the more precise information that can be 
generated, the better.
    I would say that one--back to your point about 
opportunities missed. We are at the point now where enforcement 
is crucial. We have the various U.N. Security Council 
resolutions. In the past, it was sometimes very difficult to 
judge the proper enforcement of these different provisions 
because they weren't complete embargoes. You could get into 
arcane arguments about how much----
    Mrs. Torres. The best embargo that you can get is for the 
consumer to be more informed and for the consumer to say, I 
will no longer purchase any good that comes from this country--
    Mr. Billingslea. One hundred percent.
    Mrs. Torres [continuing]. Because they are failing to 
support us in ensuring that we have a nuclear-safe world.
    Mr. Billingslea. I agree 100 percent. And I would highlight 
two particular areas. You talked about labor. One of the 
successes that Ambassador Haley has had at the U.N. is getting 
past this idea that while we would just cap North Korean labor 
at whatever level it is, the slave labor in these various 
countries, we are now--under the new resolution passed last 
night, this is going to be wound down. That is important.
    Seafood is the other area to really talk to consumers about 
to make sure that we go after any efforts to smuggle North 
Korean seafood into----
    Mrs. Torres. Can you give me an estimate of what percentage 
of North Korean revenues are from illicit sources?
    Mr. Billingslea. At this stage, virtually all revenue is 
now illicit and illegal because the U.N. Security Council has 
banned just about every single----
    Mrs. Torres. So what are our options in dealing with that?
    Mr. Billingslea. Maritime enforcement. The single most 
important thing we can do is enforce a complete prohibition on 
the sale of North Korean raw materials.
    Mrs. Torres. Thank you. My time has expired. I yield back.
    Chairman Royce. We go now to Congressman Ted Poe of Texas.
    Mr. Poe. Thank you, Mr. Chairman. Thank you all for being 
    I think always when we make big decisions, we should look 
at history. My understanding is that the Russians, Stalin, put 
the Kim regime in power; first, to invade the South, in my 
opinion, to prevent the West being aware of what is taking 
place in Eastern Europe when the Soviet Union kept moving 
through and taking that area.
    We have had three Kims in charge. They have all been very 
belligerent, they all have committed crimes, going all the way 
back to the hijacking of the Pueblo, to the KAL Flight 858, the 
attempted assassination of the South Korean President. They 
have a history of doing bad things. But it has always been the 
goal that they feel entitled because they are put there by 
Stalin to be in charge of North Korea. And as the chairman 
said, they want to concur the South. The war has never ended. 
It is a cease fire or a truce or an agreement not to--there is 
no treaty involved.
    And we have been played by the Kims for years. They talk 
about causing war, nuclear capability, and the West says, oh, 
we will pay you not to do that if you promise to be nice. And 
so they promise not to declare war on anybody, they take our 
money, supposedly to feed their starving people, and then what 
do they do a few years later? They do the same thing. And this 
has been going on all the way back to the Clinton 
    They understand one thing, that the West, the United 
States, can be bought off if they just make a lot of noise 
about doing bad things to the rest of us. We should understand 
that. We should understand that being nice and saying that we 
will take care of you and encouraging them in a diplomatic way 
to not declare war has not worked. And I'm not saying we ought 
to go to war, I am just saying that is what they understand.
    So this President has taken a different point of view. He 
is talking in a language that I think little Kim can 
understand, that those days are over. And I commend Ambassador 
Nikki Haley for her work in getting these two latest rounds of 
sanctions through the U.N. The idea that the Chinese and the 
Russians are going to agree to sanctions on North Korea, I 
think that is a stroke of genius. I don't know how she did 
that. Especially the Russians, who started all of this with 
Stalin back in 1950.
    So I want to know what our options are, not just one. I 
want to know where we are going. You know, we all want 
sanctions. Well, sanctions, they hadn't really done much to 
stop anything, but we want sanctions, and we want more 
sanctions, and we want little Kim to stop this. But what if he 
doesn't stop it? What is the U.S.'s plan? And surely the U.S. 
has a contingency plan down the road. What is it?
    You all are looking at each other. What is the contingency 
plan? Sure, we want sanctions. We want to cripple the economy. 
We want them to stop the slave trade. We want them to do all 
those things. But what have you done, because little Kim, he 
doesn't think like we do. So what are the rest of the options?
    Ms. Thornton. So, thank you. Yes, Mr. Congressman, I think 
we have a strategy. I mean, you all have heard from the 
Secretary, from other secretaries----
    Mr. Poe. What is it?
    Ms. Thornton. It is the pressure strategy. We want to solve 
this through negotiated settlement peacefully, but we are not 
taking any options off the table----
    Mr. Poe. Which are?
    Ms. Thornton [continuing]. Understand----
    Mr. Poe. I only have a minute, so you have to kind of cut 
to the chase. What are the other options?
    Ms. Thornton. Options to use force, options to use 
sanctions, pressure to choke off the regime's revenues, et 
cetera, to get them to come to the negotiating table. And I 
think we have been very clear about the strategy. We are not 
going to pay for negotiations, as has been done previously, as 
you mentioned. In past history, when we have dealt with the 
regime, they have sought payoffs. And we have made it very 
clear, the President and the Secretary, that we are not going 
to go down that road this time. We are going to band together 
with the coalition of global partners to choke off all of their 
economic revenue. And if we----
    Mr. Poe. So we have a military option down the road, if 
nothing works?
    Ms. Thornton. Sure.
    Mr. Poe. Would you agree with that, Assistant Secretary?
    Ms. Thornton. Yes. Absolutely. And as I said, we are not 
going to take any of those options off the table.
    Mr. Billingslea. I would additionally offer, at a much more 
very precise level, and you will see it in my full written 
remarks, but we are targeting two things here. We are targeting 
his access to hard currency, because he needs these dollars for 
his WMD and missile programs. And we are targeting the way he 
still has access to the international financial system. We need 
to rip that out root and stem.
    And that is what we are focused on, is shutting down his 
access to hard currency through these new U.N. embargoes that 
Ambassador Haley has successfully gotten in place. These are 
total cutoffs. You cannot trade in North Korean coal. That is a 
huge percentage of the revenue left to this dictator, given 
that we actually have relatively well shut off his arms trade 
and a number of the other things he was trading in. He has 
basically been reduced to high-volume, low-margin commodities, 
minerals, things like that, and we have to choke that off.
    But, secondly, because of lack of enforcement in the 
international system by countries, we have talked about China 
today, Russia, he still has access to the international 
financial system because he has North Korean brokers and agents 
operating with impunity brazenly abroad in foreign 
jurisdictions. That has to stop. And so that is our next step.
    Mr. Poe. Thank you, Mr. Chairman, for the extra time.
    Chairman Royce. Mr. Ted Lieu of California.
    Mr. Lieu. Thank you, Mr. Chair. And, first of all, thank 
you to the witnesses for your public service.
    I served on active duty under U.S. Pacific Command in the 
1990s at Guam, and we did a whole series of different 
exercises, most of them were directed at North Korea, and it 
was really clear there were no good military options. And the 
reason I bring that up is because diplomatic economic options 
depends on whether, in fact, you have a good military option, 
and often it is not for us to say; it is dictated by the facts 
on the ground. And if we do have amazingly great military 
options, then we might do less diplomacy and less economic 
sanctions. But if we really have no good options militarily, 
then you might have to double down on what you are doing.
    So I think it is important to just walk through some of 
those not so very good military options. And let me start with 
this question. The Trump administration's goal is to 
denuclearize North Korea. That is correct, right? But we don't 
know how many nuclear weapons they have. Isn't that correct?
    Ms. Thornton. We have estimates.
    Mr. Lieu. Say that again.
    Ms. Thornton. We have estimates.
    Mr. Lieu. You have estimates. And we also don't know where 
all those nuclear weapons are, correct? They are pretty good at 
hiding them.
    Ms. Thornton. They are good at hiding things.
    Mr. Lieu. Right. So in order to get rid of those weapons to 
get the Trump administration's goal through military force, we 
would need a ground invasion, find those weapons, and destroy 
them. Isn't that correct?
    Ms. Thornton. Sorry, I didn't get the connection.
    Mr. Lieu. Right. Since we don't know where the nuclear 
weapons are, we don't know how many they have. In order to 
denuclearize North Korea through a military option, we would 
need a ground invasion to find those weapons and destroy them. 
Isn't that correct?
    Mr. Billingslea. I suspect we would need our Department of 
Defense colleagues here to really truly answer that.
    Mr. Lieu. No, I understand. But for you to do your job, you 
also need to understand the military option, right?
    So let me just go on. North Korea also has the knowledge to 
build nuclear weapons. Isn't that correct?
    Ms. Thornton. Yes.
    Mr. Lieu. And they have got the knowledge to build ICBMs. 
And you can't unlearn that. So to keep them from doing this in 
the future, we would need to occupy the country or have South 
Korea or one of our allies occupy the country and keep them 
from doing this again in the future. Isn't that correct? If we 
were to do this through military force.
    Mr. Billingslea. Well, I don't know that that is 
necessarily--and, again, I am putting my old Pentagon treaty 
negotiator hat on, but there are countries that have abandoned 
their nuclear programs and their missile ambitions. South 
Africa is a good example. Argentina is a good example. So there 
are examples.
    Mr. Lieu. After the use of military force? No. Right?
    Mr. Billingslea. Actually----
    Mr. Lieu. Through other means. I mean, I can understand 
North Korea giving up or freezing the nuclear weapons, if we 
apply economic or diplomatic pressure. But what I am saying is 
if we were to use military force and they are going to resist 
it, and then to keep them from doing nuclear weapons in the 
future, we would need regime change to occupy the country. At 
least that is my sense. I don't know how we otherwise would do 
that. Let's just step away from nuclear weapons. They have also 
got about 5,000 tons of chemical weapons. Isn't that correct?
    Ms. Thornton. They do have chemical weapons, yes.
    Mr. Lieu. Okay. And then they have this massive 
conventional arsenal of rockets and artillery and so on, 
correct? And they can launch all of that at South Korea. They 
can use missiles against Japan. They can use missiles against 
Guam, where we have got hundreds of thousands of Americans in 
those three areas, correct? And we have millions of civilians 
in all those areas, correct? So with any military option, we 
wouldn't be able to contain escalation. Isn't that correct?
    Ms. Thornton. It is all hypothetical, so I think it depends 
on things that are happening and it depends on a lot of other 
scenarios, but you are telling the story, so go ahead.
    Mr. Lieu. Okay. So Defense Secretary Mattis has said, 
basically, there are no good military options, and the options 
would be very ugly, which then leads me to believe that your 
job is very critical. We essentially have diplomacy and 
economic sanctions. It seems like if we are going to proceed to 
diplomacy, might it not be a good idea to have an ambassador to 
South Korea that can help us?
    Ms. Thornton. Yes.
    Mr. Lieu. Okay. Where are we with that? Why hasn't the 
President nominated an ambassador of South Korea?
    Ms. Thornton. We are working on it. I know the Secretary 
spoke to this the other day, I think. We are working on it.
    Mr. Lieu. I am just saying it does send a message that we 
are not pursuing diplomacy seriously, and we are also 
disrespecting our critical ally, South Korea. And I urge the 
Trump administration to get its act together and nominate an 
ambassador to South Korea. With that, I yield back.
    Chairman Royce. Thank you, Mr. Lieu. We go now to Mr. Lee 
Zeldin of New York.
    Mr. Zeldin. Well, Thank you, Mr. Chairman. And thank you to 
both of our witnesses for being here.
    I believe that the administration has done a great job over 
the course of the first several months in office in making new 
strides, in bringing China to the table, to bring Russia to the 
table, to ramp up sanctions effort, to have more multilateral 
diplomacy, to have increased economic pressure, to engage in 
further information campaigns within North Korea that didn't 
exist previously. And I think Ambassador Haley, especially, 
deserves a whole lot of credit for her hard work at the United 
Nations with the success that she has achieved there. And we 
wish her nothing but the best.
    Some of our colleagues have spoken about the idea of not 
using a military option. I think we all should agree that the 
military option should be the last possible option that we 
would be using after everything else were to fail. But some of 
my colleagues would go a little bit further, almost to suggest 
taking the military option off of the table. And I think from 
some of the other testimony here and your answers, there is 
certainly an agreement amongst others who would disagree 
believing that having the military option on the table is one 
that helps with multilateral diplomacy and increased economic 
pressure and all of the other efforts. So it would not be wise; 
it would be unwise to take the military option off of the 
    I wanted to ask you a little bit about what that red line 
is and has the administration taken a public position on a red 
line? Do you believe we should have one? What does it look 
like? Because, for me, the red line should be that North Korea 
should not have the ability to deliver a nuclear warhead to the 
United States. And there is still a component of their 
development that appears to not be there. The chairman got to 
it a little bit earlier as he was engaging one of our 
colleagues on the other side of the aisle as far as surviving 
    So we are pursuing the diplomacy angle. We are pursuing the 
economic angle and the information angle. Thinking of military 
option as the last possible option. Preparing the whole slate 
of conventional to unconventional military options. What is 
that red line?
    Ms. Thornton. Well, the assistant secretary and I are here 
representing the economic sanctions lever and the diplomatic 
levers in this. And I have said that we are determined to 
pursue a peaceful resolution through a negotiated settlement. 
Of course, we are not taking any options off the table. We 
realize this is a very difficult problem, as has been outlined 
by Congressman Lieu here.
    I would say about red lines, we and the Secretary of State 
are determined to use this pressure campaign to get the North 
Korean regime to change its path and to come to the negotiating 
table with a serious set of proposals on denuclearization. How 
we verify that, complete verifiable, irreversible 
denuclearization is what we are seeking through a negotiated 
    I think we think we have a lot more room to go to squeeze 
them and increase the pressure of the international community. 
And I think we are continuing to see that that strategy is 
working, that the North Koreans are feeling that pressure. And 
we are focused on getting them back to the table.
    So I think as far as red lines go for a military option, I 
would certainly want to defer that question to some future 
point where we are not as much engaged in the diplomatic and 
economic pressure part of the campaign.
    Mr. Zeldin. I personally believe that when the President 
said that North Korea would be met with fire and fury, that if 
North Korea were to attack the United States, they would be met 
with fire and fury. I was not offended, by any means. And I 
believe that Kim Jong-un needs to know. And as someone who is 
homicidal and not suicidal, he needs to know that he would be 
putting himself and his regime at great risk by attacking us.
    There is a lot of hard work that has been done by the 
administration doubling down, tripling down, and quadrupling 
down, making a lot of progress, great progress specifically to 
the United Nations. I would just say if we truly want to 
prevent North Korea from having the ability to deliver a 
nuclear warhead to the United States, they are getting so much 
closer to it, that if we are actually serious about that 
military option, that we are going to have to start seriously 
having that discussion, because that may be imminent. I yield 
    Chairman Royce. Mr. Mike McCaul, who also chairs the 
Committee on Homeland Security.
    Mr. McCaul. Thank you, Mr. Chairman. I appreciate that.
    I view this as probably one of the biggest threats to the 
homeland, if they are capable of delivering an ICBM with a 
nuclear warhead to either Guam or the mainland of the United 
States. I know, looking back historically, A.Q. Khan and his 
network, this access between Pakistan, Iran, and North Korea. 
Once Pakistan got it, we couldn't take it away. Iran, we had 
our negotiations. And now, it looks like North Korea has it.
    And I think once a country has this capability, it is very 
difficult to take it away. So I don't envy your positions in 
terms of trying to negotiate our way out of this. And I think 
the last previous administrations have failed to get us to that 
point, and now we are where we are. And I think Iran is 
probably watching this whole thing play out in terms of what is 
their next step going to be as well.
    I am not going to get into military options. I know it is 
not your expertise. I do think cyber should be looked at as 
something that could be done to shut them down. And I know we 
have tremendous capability in that regard. But my question is--
I know it has been talked a lot about Russia and China, are 
they going to cooperate with these sanctions, and how much 
leverage is China putting on North Korea. But my question 
really has to go to the more illicit side of the house.
    Kim Jong-un has this North Korean Office 39 that raises--
sells basically drugs, illegal exports of minerals, as you 
mentioned, counterfeit cigarettes, a lot of other things. What 
are we doing to try to counteract that? And, also, when it 
comes to proliferation and the sale of arms, can you tell me, 
how much do you estimate North Korea is making off 
proliferation to countries like Iran and Syria?
    Mr. Billingslea. Congressman, it is good to see you.
    Mr. McCaul. Yeah, you too.
    Mr. Billingslea. So one of the things that is very 
important to underscore is that the Treasury Department and the 
authorities we wield are not, as you know from your time with 
the Department of Justice, they are not just sanctions. 
Sanctions is one of many tools we have. What we use to, in 
effect, collapse the Bank of Dandong was not a sanction; it was 
a--section 311 under the PATRIOT Act, action to root out the 
North Koreans in that bank.
    In terms of the proliferation of weaponry, because of 
previous U.N. Security Council resolutions, we have been able 
to dry up much of the illicit sales that they were engaged in 
to various African regimes and so on. There are still several 
transactions that they periodically float that we are actively 
engaging various countries to deter signing of contracts and 
going down that road. It would be very unwise for them to take 
these actions. We are in a full court press on this.
    Because of the success that Ambassador Haley and State 
Department have had at the U.N., in effect--you were asking 
about sort of illicit transactions--in effect, nearly every 
export coming out of North Korea today, as of last night, 
nearly every export is now illicit. Textiles are now illicit. 
You cannot trade in North Korean textiles. You cannot trade in 
basic minerals anymore.
    Under the previous administration, talking about bureau 39, 
one of the things they would do is sell these huge overpriced 
bronze statues, and then the weapons were the kicker on the 
side as a little sweetener for paying six times the going rate 
for a bronze statue. So that organization, the Mansudae Fine 
Arts Studio was sanctioned. And under our administration, we 
started rooting out the rest of that particular arts and 
monuments revenue-generating schema.
    North Korean labor is another category that they are 
getting significant money from. And with the results last 
night, there is now not a freeze or a cap on North Korean 
laborers, there is a requirement to wind it down. I am not a 
big fan of wind-downs, because it is real hard to verify that. 
But that is, nevertheless, a big step forward, and we intend to 
enforce that as well.
    I have reiterated on multiple occasions with counterparts 
in the Gulf and elsewhere that we need to see the North Koreans 
gone. The Department of State has been very active on this 
front, and we are seeing a drying up of revenue associated with 
the slave labor that the North Korean's employ.
    Mr. McCaul. And then to my last question, North Korea 
proliferating weapons to Iran and Syria.
    Ms. Thornton. So we do track any kind of illicit 
proliferation networks from the North Koreans and go after 
those transactions, again, with colleagues at Treasury and 
other agencies in the U.S. Government. When we find them, we 
try to block them or deter them. And we have had some success. 
It is a continuing effort on our part, and we devote a lot of 
attention to that in our Bureau of Nonproliferation.
    Mr. McCaul. But it is happening?
    Ms. Thornton. I think there are transactions that we are 
worried about, yes.
    Mr. McCaul. Okay. And I know some of that may be in another 
setting than this. So thank you very much.
    Chairman Royce. Well, I want to thank the witnesses for 
their testimony. I thank you for answering the members' 
questions here today. I am sure more of those questions will be 
submitted for the record for you to answer. There are a few 
issues that are urgent for us, but I don't think any of them 
are more urgent than the North Korean threat at this time.
    And to its credit, the administration recognized this early 
on. Secretary Tillerson's first focus as Secretary of State was 
North Korea. And he has been extensively engaged, working with 
allies in the region, while pressuring China and Russia and 
other countries that are funding the Kim regime. We need more 
sanctions, tougher sanctions. We need to supercharge this right 
now. And the administration is moving in the right direction. 
And China, each day, is rethinking the cost of its financial 
support for North Korea.
    The administration's focus on Korean slave labor abroad is 
very good. Sanctions are just one element of power we need to 
bring to bear. We need to stop giving only lip service to the 
power of information inside North Korea, broadcasting 
information in to change attitudes and conditions in North 
Korea. We simply aren't doing this well enough, and it must be 
a priority.
    And, again, thank you for your testimony. We look forward 
to your follow-up, and this hearing stands adjourned.
    [Whereupon, at 12:25 p.m., the committee was adjourned.]

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